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Gold surged to an all-time high on Monday, fuelled by geopolitical tensions and central bank interest rate cuts.

Bullion’s price climbed 0.4 per cent to $2,732.45 a troy ounce in early trading in London on Monday, representing a 40 per cent gain in the past year.

The war in the Middle East, coupled with uncertainty over the outcome of next month’s US presidential election, have supercharged gold’s allure as a haven asset.

“The outlook for gold is quite bullish,” said Joni Teves, UBS precious metals strategist, who has a $3,000 a troy ounce price target next year. “We think that investor holdings of gold have a lot of room to grow over the next year or so, and that should drive prices higher.”

The anticipation of further rate cuts, with the US Federal Reserve next meeting on November 6-7, has also helped propel gold prices this year. Gold does not yield any interest, so prices typically benefit from falling interest rates.

Many global central banks are in easing mode, with recent rate cuts in the eurozone, Canada and the UK, among others.

Although physical gold demand has been dented by high prices in the top market China, buying from central banks has been very strong as they diversify their reserves away from the dollar.

During the first half of this year, central bank buying hit a record high of 483 tonnes, according to the World Gold Council, the industry body.

Western investors have also poured into gold since the summer, with five consecutive months of global inflows into gold-back exchange traded funds during May to September.

Ole Hansen, head of commodity strategy at Saxo Bank, said the gold price drives include “the risk of fiscal instability and uncertainties surrounding the US presidential election” as well as central banks diversifying away from the US dollar.

The outcome of the US election on November 5 between vice-president Kamala Harris and former president Donald Trump is looking very close, adding to the uncertainty.

“There are a lot of risks around the next few weeks, with the US election coming up,” said Teves. “We could be in for some choppy price action.”

Silver prices have also climbed sharply, hitting a near 12-year peak, reflecting tight supply for the metal, which is used in electronics and photovoltaic cells, as well as a knock-on effect from rising gold prices.