Gold prices climbed over 1% on Thursday after hitting a record high in the previous session, as the U.S. Federal Reserve embarked on its rate easing cycle.

Spot gold rose 1.1% to $2,586.37 per ounce by 1105 GMT, while U.S. gold futures rose 0.5% to $2,611.50. Spot gold had scaled an all-time high of $2,599.92 on Wednesday.

The Fed kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction, in a move meant to show policymakers' commitment to sustaining a low unemployment rate now that inflation has eased.

In addition, Fed policymakers projected the benchmark interest rate would fall by another half of a percentage point by the end of this year, a full percentage point next year, and half of a percentage point in 2026.

"The prospect of further rate cuts makes gold attractive and new record prices cannot be ruled out," said Alexander Zumpfe, a precious metals trader at Heraeus Metals Germany.

Lower interest rates reduce the opportunity cost of holding bullion, which yields no interest.

The $2,600 mark proved too high a hurdle for now given how far and fast gold prices rose in anticipation of the Fed's September cut, said Adrian Ash, director of research at Bullionvault.

"There's lots of room for gold’s bull market to keep running as the real returns to cash fall into the election and then into new year 2025."

Spot silver rose 3.5% to $31.12 per ounce after hitting its highest level since July in the previous session.

"We maintain our view that silver is set to benefit from a rising gold price environment," UBS said in a note.

"Our expectation that the silver market will remain in deficit over the coming years implies continuous declines in above-ground inventories, which should help fundamentally underpin prices as well as act as a tailwind for investor interest."

Platinum added about 2% to $987.71 and palladium gained 2.1% to $1,084.

(Reporting by Ashitha Shivaprasad and Rahul Paswan in Bengaluru; Editing by Conor Humphries and Varun H K)