Gold's record-breaking rise continues ahead of the U.S. election, seen as a major risk event that could trigger a market reaction, with prices currently steady at $2,776.40 an ounce by 8:30 am ET.

Gold (XAUUSD:CUR) is up 5% this month and 34% on the year, second only to silver (XAGUSD:CUR), which has surged 42.3%. These rallies prompt concern over potential unsustainable gains and a possible peak, Ole Hansen, Head of Commodity Strategy at Saxo Bank said in a note.

Currently, "gold and silver show no euphoria—only strong rallies" as investors seek safe assets amid concerns over fiscal instability, geopolitical tensions, de-dollarisation driving strong demand from central banks, Chinese investors turning to gold amid record-low savings rates, and increased uncertainties surrounding the U.S. presidential election.

Additionally, rate cuts by the Federal Reserve and other central banks are reducing the cost of holding non-interest-bearing assets like gold and silver.

Hansen further states that, it is worth noting the lack of response to the Middle East de-escalation seen in crude oil prices—which slumped the most in two years on Monday—leading Saxo to conclude that the latest strength in gold is increasingly being seen as a hedge against a potential “Red Sweep” at the 5 November US election, where one political party, in this case, the Republicans, controls both the White House and Congress.

"This scenario has lifted U.S. bond yields amid concerns about excessive government spending, pushing the debt-to-GDP ratio higher, while fuelling inflation fears through tariffs on imports as well as geopolitical risks."

What is the options market telling us?

According to Saxo Bank, a look at the top ten most traded options strikes in gold and silver futures in the last week, shows that, unsurprisingly, "an overriding focus on bullish strategies. However, it is interesting to note some favouritism towards silver".

Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to join the separate political discussion.