*

US gold futures breached the $4,000 level

*

US government shutdown entered its seventh day

*

China's central bank extends gold buying for 11th month

(Rewrites for U.S. morning hours)

By Anushree Mukherjee

Oct 7 (Reuters) - Gold extended its record-breaking

rally on Tuesday, hovering just $22 shy of the $4,000 per ounce

milestone, driven by expectations of a Federal Reserve rate cut

later this month and persistent safe-haven demand amid the

ongoing U.S. government shutdown.

Spot gold was up 0.4% to $3,978.01 per ounce by 0923

am ET (1323 GMT), after hitting an all-time high of $3,985.48

earlier in the session.

U.S. gold futures for December delivery rose 0.6% to

$4,000.90, breaching the $4,000/oz milestone for the first time.

"It's ongoing safe-haven flows stemming in part from the

government shutdown and no real indication that is likely to be

resolved in the immediate term here. So there's still a pretty

decent bid in gold," said Peter Grant, vice president and senior

metals strategist at Zaner Metals.

Non-yielding gold, which tends to do well during times of

uncertainty and low interest-rate environments, has climbed 52%

so far this year. The metal's rally has been driven by a

cocktail of factors, including expectations of interest rate

cuts, ongoing political and economic uncertainty, solid central

bank buying, inflows into gold ETFs and a weak dollar.

The U.S. government shutdown entered its seventh day on

Tuesday. The shutdown has postponed the release of key economic

indicators, forcing investors to rely on secondary,

non-government data to gauge the timing and extent of Fed rate

cuts.

Meanwhile, political turmoil in France and Japan gripped

currency and bond markets for a second day running.

Investors are now pricing in a 25-basis-point cut at the Fed

meeting this month, with an additional 25-bp cut anticipated in

December.

Elsewhere, China's central bank added gold to its reserves

in September for the 11th straight month, data from the People's

Bank of China showed.

Goldman Sachs raised on Monday its December 2026 gold price

forecast to $4,900 per ounce from $4,300, citing strong Western

exchange-traded fund (ETF) inflows and likely central bank

buying.

Elsewhere, spot silver was down 0.4% at $48.31 per

ounce, platinum fell 0.1% to $1,624.63 and palladium

was up 1.6% at $1,340.68.