Gold prices have hit a fresh high as increasing hopes of US interest rate cuts from the Federal Reserve prompted investors to buy more of the precious metal.

The spot price of gold rose to a record $2,531.60 (£1,943.83) an ounce on Tuesday afternoon, up over 1% on the day.

Gold bars generally weigh 400 troy ounces (12.4kg), so a standard gold bar is now worth more than $1m.

Analysts have ascribed much of the rally to the prospect of interest rate cuts by central banks, led by the US Federal Reserve. Lower interest rates tend to diminish the lure of bonds and shares because it diminishes the likely returns. That has prompted many investors to place their bets on gold increases.

Gold’s practical uses are limited mainly to jewellery and some electronics, and it does not offer anything in the way of returns except the possibility of future price rises.

However, it is viewed by investors as a safe haven during turbulent economic and geopolitical times. A reaction to the wars in Ukraine and Gaza appears to have been a factor behind the increase in its value over the past two years, even as US interest rates rose from historic lows to the highest in 23 years.

Gold prices have risen by two-thirds since the end of 2019. However, much of that gain has come since the start of March this year. Prices are up by more than a fifth since then, helped by the increasing expectation of rate cuts.

Antonio Ernesto Di Giacomo, a senior market analyst at XS, a trading platform, said that the recent surge in gold prices reflected a “rise in uncertainty and investors’ flight to safe havens” as well as the prospect of interest rate cuts from the Fed.

“The historic rise in the price of gold above $2,500 per ounce reflects growing global economic uncertainty and investors’ continued search for safety,” he said. “With economic, geopolitical, and monetary factors driving this surge, gold is solidifying its position as a safe haven in times of volatility.”

The investment bank UBS has said that prices could reach $2,600 an ounce by the end of 2024.

Markets expect the Fed to cut its target rate for interest rates by 0.25 percentage points to between 5% and 5.25%. Investors will be listening closely to a speech by the Fed chair, Jerome Powell, on Friday at the Jackson Hole resort in Wyoming for signs that rate-setters are content to cut at their next meeting on 18 September.

Other big central banks have already started reducing interest rates, with the European Central Bank cutting in June and the Bank of England following suit at the start of this month. Threadneedle Street’s reduction in the base rate to 5% is already translating into cheaper home loan deals for some mortgage borrowers, with seven of the UK’s 10 biggest lenders now advertising fixed-rate offers under 4%.