Gold settled nearly 3 percent higher on Wednesday, recouping most of the previous session's tumble, as a drop in the dollar and weak U.S. equities sparked bargain hunting in the precious metal.
Bullion accelerated gains after data showed U.S. private employers added fewer-than-expected jobs in September, according to data from payrolls processor ADP, underscoring steady but still sluggish growth in the labor market.
A partial government shutdown in Washington entered a second day, adding to concerns over how soon a political compromise would be reached. The Congress must also agree to raise the debt limit in coming weeks or risk a default that could roil global markets.
"The market is jittery because of the government shutdown. If the economy numbers continue to be weaker than expected, we may see a slide in the dollar, and money in equities flow back into Treasuries and metals for the time being," said Tom Power, senior commodities trader at futures brokerage R.J. O'Brien.
In a reversal of Tuesday's market, the S&P 500 index fell while safe havens, such as U.S. Treasuries and gold rose.
Bullion's safe-haven status is usually burnished by economic uncertainty and geopolitical tension. Prolonged U.S. budget talks could lift gold's prices, as this maintains pressure on the Federal Reserve to keep its monetary stimulus for an extended period of time.
For more information on commodities prices, please click here.