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 fixed income assets such as bonds, which would yield weaker returns.

Hotter-than-expected inflation in March pushed back market expectations of a rate cut to September, and the expectation is now for two rate reductions instead of three.

n spite of that, analysts remain bullish on the yellow metal’s outlook, boosted by continued physical demand as well as its appeal as a geopolitical hedge. 

“We project $3,000/oz gold over the next 6-18m,” said Citi’s analysts led by Aakash Doshi, Citi’s North America head of commodities research. The financial gold “price floor” has also moved higher from around $1,000 to $2,000 per ounce, Citi said.

On Friday, Goldman Sachs referred to the gold market as an “unshakeable bull market” and revised upward its price target for the yellow metal from $2,300 per ounce to $2,700 by the end of the year.

— CNBC’s Gina Francolla contributed to this report.