Oct 3 (Reuters) - Gold prices rose on Friday, hovering near record highs and heading for a seventh consecutive weekly gain, supported by growing concerns over the economic impact of a prolonged U.S. government shutdown and expectations of interest rate cuts.
Spot gold rose 0.5% to $3,876.55 per ounce by 10:48 a.m. ET (1448 GMT), after hitting a record high of $3,896.49 on Thursday. Prices have gained more than 2% so far this week.
U.S. gold futures for December delivery rose 0.9% to $3,902.60 per ounce.
"I think the longer the government stays shut down, that's going to be a steady bullish element for the gold market. If they happen to have a surprise weekend agreement to open the government back up, that would probably be a bearish element," said Jim Wyckoff, senior analyst at Kitco Metals.
The U.S. Senate will vote again on dueling Democratic and Republican plans to end a government shutdown now entering its third day, though there is no sign that either plan will win passage.
The key U.S. non-farm payrolls report, originally slated for release on Friday, has been postponed, leaving investors to lean on alternative indicators that point to a cooling labor market and sustain expectations of an imminent rate cut.
Investors are pricing in a 98% probability of a 25-basis-point rate reduction in October and a 90% likelihood of another similar cut in December, according to CME Group's FedWatch tool.
Gold, often used as a safe store of value during times of uncertainty, thrives in a low-interest-rate environment and has risen over 47% so far this year.
UBS in a note said it expects gold to rise to $4,200 per ounce over the coming months as the "opportunity cost of holding gold is falling thanks to declining real interest rates in the U.S., while expectations of further broad U.S. dollar weakness are another tailwind for gold."
Elsewhere, spot silver climbed 1.8% to $47.81 per ounce, platinum rose 2% to $1,601.05 per ounce and palladium gained 2.1% to $1,266.87 per ounce.
Reporting by Noel John and John Biju in Bengaluru; Editing by Leroy Leo
