Oct 6 (Reuters) - Gold prices surged to record highs

above $3,900 per ounce on Monday on expectations of further U.S.

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 U.S. 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.