PRECIOUS-Gold hits record high, set for best month in 16 years on safe-haven rush

*

Gold up 12.3% so far this month

*

SPDR Gold Trust holdings at over three-year high

*

Silver on track for best month since July 2020

(Updates for Asia market close)

By Brijesh Patel

Sept 30 (Reuters) - Gold prices hit a fresh high on Tuesday and were poised to log their best month in nearly 16 years, as fears of a potential U.S. government shutdown and growing expectations of further Federal Reserve rate cuts boosted demand for the metal.

Spot gold rose 1% to $3,870.14 per ounce, as of 0634 GMT. Bullion has risen 12.3% so far in September, and is on track for its biggest monthly percentage gain since November 2009.

U.S. gold futures for December delivery gained 1.1% to $3,897.80.

"The looming government shutdown creates a haze of uncertainty over the market, which has served to accelerate gold's gains," said KCM Trade Chief Market Analyst Tim Waterer.

"The $4,000 level now seems a viable year-end target for gold, whilst market dynamics such as lower interest rates and ongoing geopolitical hotspots keep working in favour of the precious metal."

U.S. President Donald Trump and his Democratic opponents appeared to make little progress at a White House meeting aimed at heading off a government shutdown that could disrupt a wide range of services as soon as Wednesday.

Recent U.S. economic data has lifted expectations for further rate cuts this year, with traders pricing in a roughly 89% chance of a 25-basis-point reduction at the next Fed meeting in October, according to CME Group's FedWatch tool.

St. Louis Federal Reserve President Alberto Musalem said he was open to further cuts, but added that the Fed must be cautious and keep rates high enough to continue to lean against inflation.

Gold, often used as a safe store of value during times of political and financial uncertainty, thrives in a low-interest-rate environment.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.60% to 1,011.73 metric tons on Monday, their highest since July 2022.

Investors now await U.S. data on job openings, private payrolls, the ISM manufacturing PMI and non-farm payrolls report on Friday for further clues on the economy's health.

The U.S. Labor Department confirmed on Monday that its statistics agency would suspend data releases, including the closely-watched monthly employment report for September, in the event of a partial government shutdown.

Elsewhere, spot silver gained 0.3% to $47.08 per ounce and has climbed 18.6% so far this month. Platinum rose 0.5% to $1,609.40 and palladium climbed 0.9% to $1,278.62.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu Sherry Jacob-Phillips and Harikrishnan Nair)