Gold advanced to a record high after the Federal Reserve lowered its benchmark interest rate by a half a percentage point Wednesday, in an aggressive start to a policy shift to boost the labor market and defend the economy.

The Fed was widely anticipated to lower interest rates after holding them at a two-decade high for more than a year, but traders and forecasters were split over how aggressive the first cut would be.

Gold, which tends to benefit from lower rates, rose as much as 0.8% to a fresh all-time high of $2 590.13 in New York.

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Gold prices have broken out dramatically this year, soaring more than 25% to successive records. While the rally at the start of 2024 was underpinned by emerging market demand — particularly from central banks and Asian consumers and investors — the focus in recent months has shifted squarely to the Fed, and the outlook for the US economy. Non-yielding bullion usually benefits in a low-rate environment, and recessionary worries tend to drive investors to seek safety in gold.

Traders across financial markets had spent months debating the size of the US central bank’s first interest-rate cut, parsing economic data and remarks from policymakers. Spot gold has hit repeated records over the past week as investors weighed prospects that the Fed would deploy a rate reduction bigger than a quarter percentage point at this week’s meeting.

Gold, Treasuries and the S&P 500 Index have all typically risen as the Fed starts lowering rates, according to a Bloomberg News analysis of the past six easing cycles going back to 1989.

The rate cut announced on Wednesday caps a period of flux in the gold market, as some analysts have pointed to a return to more traditional trading patterns, and in particular to gold’s longstanding tendency to rise and fall in the opposite direction to real yields. That relationship had broken down in recent years, as gold remained historically elevated even as rates soared — with prices supported instead by huge central bank purchases, as well as surging demand from investors and consumers in Asia.

In recent months, there have been signs of western investors jumping back into the gold market as bets mounted that the Fed was about to pivot. Holdings in gold-backed exchange traded funds have risen for ten of the past 12 weeks, while long-only gold positions in Comex gold futures are hovering near the highest in four years.