The price of gold hit a record high on Tuesday with other precious metals also making strong gains, driven by investor anxieties over tensions in the Middle East and speculation that US interest rates will be cut this summer.

The metal rose 1.1%, hitting $2,141 per gold ounce on Tuesday, beating the previous record of $2,135 set in December, before easing back to $2,128 later in the day, according to data from the London Stock Exchange. Palladium also broke the $1,000/oz mark, making gains of more than 10%.

Gold has been on a 16-month rally, surging 30% since late 2022, but the latest record comes after US Federal Reserve Chair Jerome Powell reiterated that the US central bank is likely to cut interest rates this year.

Powell said it will probably be appropriate to begin lowering borrowing costs “at some point this year”, but said the Federal Reserve is not ready to do this yet. He also said he is not looking for inflation to reach the central bank’s 2% target. Reductions in borrowing costs typically push gold prices up because it does not offer any interest.

Prices were also driven up by months of massively ramped-up buying by central banks and Chinese investors in what some analysts have described as “phenomenal” purchasing. At the end of September last year, gold prices in China hit record highs, soaring more than $100 over international prices as the East Asian country continues to face economic challenges.

Geopolitical tensions in the Middle East, exacerbated in recent months by Israel’s war in Palestine, have also affected prices as the metal is often used as a reliable store of value during periods of uncertainty. Since the start of the Israel-Hamas conflict, prices have risen more than $300/oz. Some analysts believe the metal could soon break the $2,300 mark.

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James Steel, precious metals analyst at HSBC, told the Financial Times: “There are new entrants in the market who are operating off of uncertainty and looking for gold as a safe haven,” he said, warning that gold could fall as it did in December. “It is a lot of money coming in as there is a more narrow group of assets that are in vogue and gold is one of them.”