Spot gold was up 1.4% at $4,200.11 per ounce, as of 0659 GMT. U.S. gold futures for December delivery gained 1.3% to $4,218.0.
U.S. President Donald Trump said on Tuesday his administration planned to produce on Friday a list of "Democrat programmes" that will be closed as a result of the federal government shutdown.
"The U.S. government shutdown and dovish comments from Jerome Powell have provided the latest reasons for gold prices to accelerate higher," said StoneX senior analyst Matt Simpson.
Federal Reserve Chair Jerome Powell said the U.S. labour market remained subdued, though the economy "may be on a somewhat firmer trajectory than expected."
Powell said interest rate decisions would be made on a "meeting-by-meeting" basis, balancing labour market weakness with persistent inflation above target.
Bullion tends to do well in a low interest rate environment and during times of political and economic uncertainties.
Safe-haven gold has gained 59% year-to-date, driven by multiple factors, including geopolitical and economic uncertainties, expectations of U.S. rate cuts, strong central bank buying, de-dollarisation trend and robust exchange-traded fund inflows.
"This rally has also become a momentum trade, where traders pile in simply to chase prices getting away from them," Simpson said.
Trump said Washington was considering cutting some trade ties with China, including in cooking oil. Both countries began imposing tit-for-tat port fees on Tuesday.
The International Monetary Fund raised its 2025 global growth forecast, citing better-than-expected tariff and financial conditions, while cautioning that renewed U.S.-China trade tensions could curb growth.
Silver rose 2% to $52.48, after having hit a record high of $53.60 on Tuesday, tracking gold's rally and on tightening supply in the spot market.
Elsewhere, platinum climbed 1.3% to $1,658.65 and palladium rose 0.9% to $1,538.75.
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