Gold extended its rally to another record high Thursday, as investors turned to the safe-haven asset due to U.S.-China trade tensions and the U.S. government shutdown, with prospects of interest rate cuts further boosting demand.

Spot gold was up 0.8% at $4,242.38 per ounce, as of 1208 GMT. Earlier, bullion touched a record high of $4,247.49, climbing for a fifth consecutive session.

U.S. gold futures for December delivery were up 1.4% at $4,258.50.

Gold, traditionally seen as a store of value during times of instability, has risen 60% year-to-date.

Investors' focus this week has been on the trade spat between the world's biggest economies, with U.S. officials on Wednesday criticizing China's major expansion of rare earth export controls as a threat to global supply chains.

"Renewed trade frictions (are) adding to uncertainty across global supply chains... investors are increasingly turning to gold," said Nitesh Shah, commodities strategist at WisdomTree, adding that gold's breakout also reflects investor unease over U.S. policy credibility.

There is a strong likelihood the metal remains above the $4,200 level, Shah added.

Gold's rally has been driven by a number of factors, including expectations of interest rate cuts, political and economic uncertainty, solid central bank buying, inflows into gold exchange-traded funds and a weak dollar.

Meanwhile, the two-week-old federal government shutdown may cost the U.S. economy as much as $15 billion a week in lost production, a Treasury official said on Wednesday.

On the monetary policy front, traders are pricing in a 25 basis-point cut by the U.S. Federal Reserve in October with another in December, seen as 98% and 95% chances respectively.

Non-yielding gold typically performs well in a low interest-rate environment.

"To get to $5,000 in 2026, the market would likely need to see physical demand hold steady but a further upswing in financial demand for gold allocations," said Aakash Doshi, head of gold metals strategy, State Street Investment Management.

The record high prices and a supply shortage have also spurred gold smuggling into India - the world's second-biggest buyer of the precious metal - ahead of key festivals.

Spot silver fell 0.1% to $53.00 per ounce, after hitting a record high of $53.60 on Tuesday, tracking gold's rally and supported by tightness in the spot market.

Platinum rose 1.1% to $1,673.12 and palladium gained 1.7% to $1,562.23.