Gold is shining ‘bright like a diamond’ and could hit $3,000, says Citi

Gold prices continued to hover near record highs days after Middle East tensions flared, boosting the safe-haven appeal of bullion.

Gold prices notched another record close Monday, with the most-active June contract for gold futures trading 0.37% higher to settle at $2,383 per ounce, and some say there's more room to run.

"The recent gold rally has been aided by geopolitical heat and is coinciding with record equity index levels," Citi wrote in a note dated April 15.

Demand for the safe-haven asset grew amid escalating tensions in the Middle East after Iran fired over 300 drones and missiles directly at Israel — most of which were intercepted, thanks to Israel's Iron Dome air defense system.

Market watchers are closely monitoring a potential retaliation by the Jewish state, which has vowed to "exact a price" from Iran.

A significant retaliation could lead to a wider conflict, which would consequently trigger renewed buying of gold, as well as a rally in oil prices and strengthening of the U.S. dollar, said Bartosz Sawicki, market analyst at financial services firm Conotoxia fintech.

Gold, which retains its value as a hedge against inflation, tends to perform well in periods of economic uncertainty when investors move away from the riskier assets such as equities.

Bullion prices hit an all-time high of $2,448.80 per ounce intraday last Friday.

Spot gold prices have been on a tear since the start of the year, climbing over 15% year-to-date on the back of a cocktail of factors including a global central bank splurge, geopolitical tensions and expectations of rate cuts by the U.S. Federal Reserve. 

Gold prices usually have an inverse relationship with interest rates. As interest rates fall, gold becomes more appealing compared with