Gold prices surged to an all-time high of $2,730 (£2,093) this morning as investors sought safe-haven assets amid rising geopolitical tensions.
This means that the price of the yellow metal has surged 38 per cent this year.
The rally has come as conflict intensified between Lebanon and Israel, with fears growing over a broader regional escalation.
The uncertainty of the US election outcome, with particular concerns over Donald Trump’s improved odds in betting markets, has also pushed investors towards safe haven assets.
“Gold typically attracts investors’ attention when they are looking for a store of value during uncertain times”, said AJ Bell’s Russ Mould.
Gold is a proven hedge against inflation as its investment is seen as a preservation of the real value of assets when other prices rise. It’s worth remains resilient when other markets aren’t.
It tends to rally as interest rates fall due to lower return on cash from banks, or bonds from governments, which push investors away from cash or debt towards the metal.
“Trump winning the US presidential election would raise the risk of a trade war, and his provocative nature could lead to heightened uncertainty on the markets. Owning gold is essentially an insurance policy against unknowns”, Mould explained.
Hargreaves Lansdown noted that investor appetite for gold has been bolstered by the “risk of over spill into wider conflict in the region” and uncertainty around the upcoming elections, making gold an attractive asset for those seeking to hedge against market volatility.
“Gold’s rally is a direct reflection of the fear and instability facing investors”, Mould added.
Kathleen Brooks, founder of Minerva Analysis, said China’s stimulus and a strong US economy are also boosting demand for gold.
Brooks also argued that as well as the geopolitical drivers, “the second driver is old-fashioned supply and demand factors that are influencing the gold price.”
“Gold demand hit a record high in the second quarter, and we expect this was extended in the third quarter”, she said, “with no increased supply, the price of gold will naturally rise.”
