As gold prices touched a record high of above $3,840, the yellow metal hovered around ₹116,200 on the MCX on Monday, while silver rose above $47.40 to touch ₹144,000, up by almost 9%. The precious metals continue to get safe-haven support amid the uncertainty surrounding U.S. tariffs, the potential shutdown of the U.S. government this week, and the expectation that the Fed will lower interest rates by an additional 50 basis points this year.

Darshan Desai, CEO of Aspect Bullion & Refinery, said "Gold prices remain near record highs, driven by fears that a failure to reach a spending resolution by Tuesday could trigger a shutdown of U.S. government services. Despite a stronger U.S. dollar, expectations of further interest rate cuts by the Federal Reserve, concerns over central bank independence, and continued demand from central banks and ETFs are supporting elevated prices. Any dip in prices is likely to attract renewed buying interest."

However, Manav Modi, analyst–precious metal research, Motilal Oswal Financial Services Ltd., said, "Dollar index inched slightly higher, hovering around 98; however, no major impact was seen on prices."

On the data front, U.S. GDP was reported better than expectations. At the same time, the U.S. commerce department said its personal consumption expenditures price index (PCE) rose 0.3% in August, v/s the prior 0.2% rise in July, in line with expectations.

Despite mixed comments from Fed officials and the Fed chair, expectations continued for a rate cut this year. Traders are currently pricing in a 90% chance of a Fed cut in October, with around a 65% probability of another in December. Reports regarding the U.S. shutdown also led to strong safe-haven buying. If the debt bill is not passed before October 1, it could push bullion further.

Renisha Chainani, head of research at Augmont, said, "Unless Congress can come to a financial agreement before the new fiscal year begins on October 1, the federal government is once again in danger of shutting down. We are expected to retest another record high this week, and sentiment is extremely positive. It is possible to argue that the current long position of the gold and silver markets is a reason to be cautious about potential future gains."

Precious metal prices are supported by a weaker dollar and growing expectations that the Federal Reserve will likely continue with interest rate cuts later this year, along with a surge in overall demand.

On the other hand, physical gold demand in China weakened further last week, with discounts hitting multi-year lows, while steady buying persisted in other major Asian hubs, despite high prices, in anticipation of further gains. SPDR holdings rose 0.89% to 1,005.72 tonnes on Friday from 996.85 tonnes on Thursday. "Focus now shifts to US jobs market data, ISM manufacturing PMI for further clues on the economy's health, scheduled later this week," said Modi.

"In addition, encouraging consumer sentiment, personal income, and spending data lent further support to precious metals," said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.