Gold prices surged to record highs above $3 900 per ounce on Monday on expectations of further US rate cuts, and as investors fleeing economic and political uncertainty piled into the safe-haven precious metal.

Spot gold hit an all-time peak of $3 958.57 an ounce and has climbed 48% so far this year, adding to last year's gain of 27%.

"Investors are navigating everything from shifting Fed policy to global political developments and gold is playing its traditional role as a store of value," said Joseph Cavatoni, senior market strategist at the World Gold Council.

The Federal Reserve cut interest rates for the first time this year in September, with markets pricing in two more cuts this year. 

Lower interest rates reduce the opportunity cost of holding assets such as gold, which pays no interest or dividends, while also weakening the dollar.

Conflict in the Middle East, the Russia-Ukraine war and concerns around the Fed's independence have also driven safe-haven demand for gold.

Adding to the uncertainty, France's new Prime Minister Sebastien Lecornu and his government resigned on Monday, hours after taking office, while the US government shutdown entered its sixth day.

Momentum for gold's rally to records has also come from central bank buying and rising inflows into physical gold exchange-traded funds (ETFs).

"As long as uncertainty levels are high, ETF flows should continue," said Michael Haigh, global head of commodities research at Societe Generale.

Global gold ETF demand rose to 587.8 metric tons between January and September, compared to a 6.8-ton outflow for the full-year 2024, according to the WGC.

SILVER'S BULLISH TACK
Silver climbed to $48.55 an ounce, its highest since May 2011.

Its rally is supported by the same factors as gold, as well as strong industrial demand and a tight spot market.

"Silver is a bit of a catch-up trade as it has been underperforming gold for several quarters prior to mid-2025," said Aakash Doshi, global head of gold strategy at State Street Investment Management.

The metal's inclusion on a draft list of U.S. critical minerals has sparked speculation over potential tariffs, drawing close attention from the market.

Silver is on track for a fifth year of structural market deficit, which is expected to amount to 117.6 million troy ounces in 2025, according to the Silver Institute.