PRECIOUS-Gold stays firm after Fed raises rates

* Fed sets first U.S. rate hike in nearly a decade
* Increase is start of "gradual" tightening cycle
* GRAPHIC-2015 asset returns: http://link.reuters.com/dub25t

(Rewrites throughout, updates prices; adds Fed statement,
comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Dec 16 (Reuters) - Gold held gains on
Wednesday, after the Federal Reserve raised U.S. interest rates
for the first time in nearly a decade, as expected, making clear
it was a tentative beginning to a "gradual" tightening cycle.
The U.S. central bank's policy-setting committee raised the
range of its benchmark rate by a quarter percentage point to
between 0.25 and 0.50 percent, ending a lengthy debate about
whether the economy was strong enough to withstand higher
borrowing costs.
"Gold has held steady as the dovish statement and lower dot
plot has leavened the impact of the first rate hike in nine
years," said Tai Wong, director of base and precious metals
trading for BMO Capital Markets in New York.
"The muted reaction suggests that the weakest shorts covered
earlier today when gold traded above $1,078."
Spot gold XAU= was up 1.2 percent at $1,072.71 an ounce at
2:40 p.m. EST (1940 GMT), below the session high of $1,078.20.
Prior to the Fed's statement, U.S. gold futures GCv1 for
February delivery settled up 1.4 percent at $1,076.80 an ounce.
Gold prices have fallen nearly 10 percent this year, largely
on the back of speculation that U.S. rates would be raised from
record lows, lifting the opportunity cost of holding
non-yielding bullion while boosting the dollar.
They have recovered from near six-year lows this month,
however, as attention switched from the timing of the first hike
to the potentially slow pace of future increases.
In a Reuters poll of more than 90 economists taken between
Dec. 4 and 9, the probability that the Fed will raise rates rose
to 90 percent. ECILT/US
Global equity markets rallied in volatile trade while the
dollar and U.S. Treasury yields rose after the Fed's statement.
MKTS/GLOB
Investors scaled back positions in gold ahead of the Fed
meeting. Holdings of the world's largest gold-backed
exchange-traded fund, New York-listed SPDR Gold Trust GLD , are
at their lowest since September 2008.
U.S. government data showed investors had increased their
bearish bets on gold to record levels this month, although they
have since edged back from that peak.
"The gold market is devoid of any funds coming in from
gold-backed exchange-traded funds and jewelry demand remains
fairly soft," said INTL FCStone analyst Edward Meir.
Silver XAG= was up 3 percent at $14.16 an ounce, having
dropped to its lowest in more than six years this week at
$13.60.
Platinum XPT= was up 1.7 percent at $869.75 an ounce and
palladium XPD= was up 0.5 percent at $567.50 an ounce.