Gold prices soared to a record high in early Asian trade on Monday amid a sharp weakening in the yen and as bets on lower U.S. interest rates remained squarely in play. 

Bullion was supported by persistent concerns over a U.S. government shutdown, which remained in place as lawmakers marked little progress towards a spending bill. 

U.S. President Donald Trump’s deploying of the California National Guard to Portland, Oregon, also sparked some uncertainty, especially after the two states sued against the move. 

Spot gold jumped as much as 1% to a record high of $3,926.63 an ounce, while gold futures for December rose 1.1% to a peak of $3,951.32/oz. 

Gold surges as yen slides on new LDP leader

Gains in gold came amid heightened volatility in foreign exchange markets, especially after the Japanese yen weakened sharply in morning trade.

The yen slid after conservative politician Sanae Takaichi was elected as the leader of Japan’s ruling Liberal Democratic Party, setting her up to become the next prime minister. 

The yen’s USD/JPY pair, which gauges the amount of yen required to purchase one dollar, jumped 1.4% to 149.58 yen. 

Takaichi is viewed as fiscally dovish, and is expected to oppose any further monetary tightening by the Bank of Japan. This notion battered the yen and Japanese bond markets. 

A weaker outlook for the yen diminished the currency’s haven appeal and pushed more flows into gold.

Metal prices buoyed by rate cut bets

Broader metal prices advanced on Monday, extending gains from last week amid growing conviction that the Federal Reserve will cut interest rates again in October. The central bank trimmed rates by 25 basis points in September, but presented a cautious outlook for future cuts. 

Traders were seen pricing in an over 99% chance for a 25 bps cut later in October, CME Fedwatch showed. 

Spot platinum rose 1.2% to $1,627.17/oz, while spot silver rose 0.6% to $48.2955/oz. 

Industrial metals lagged, with benchmark copper futures on the London Metal Exchange rising 0.2% to $10,731.0 a ton. COMEX copper futures fell 0.3% to $5.0923 a pound. 

An ongoing U.S. government shutdown also kept demand for gold largely in play, even as risk-driven markets in the country rose past concerns over the impact of a shutdown. 

But lawmakers appeared to have made little progress towards passing a spending bill and ending the shutdown. An extended shutdown could herald more near-term disruptions in the U.S. economy, while the furloughing of federal employees presents risks for the labor market.