* Fed holds rates steady
* Palladium scales new 12-week high (Adds quote, details, updates prices)
By Karthika Suresh Namboothiri and Diptendu Lahiri
June 19 (Reuters) - Gold prices climbed on Wednesday after the U.S. Federal Reserve signalled interest rate cuts were possible later this year, as it responded to increased economic uncertainty and tepid inflation.
Spot gold XAU= rose 0.3% to $1,349.40 per ounce as of 2:43 p.m. EDT (1843 GMT). U.S. gold futures GCcv1 settled 0.1% lower at $1,348.8 per ounce.
"Gold rallies about $9 so far despite current rates unchanged as dots suggest a split Fed, but cuts clearly in the pipeline," said Tai Wong, head of base and precious metals derivatives trading at BMO.
Seven of 17 policymakers said they expected it would be appropriate to cut rates by half of a percentage point by the end of 2019, and an eighth saw a rate cut of a quarter point as appropriate. biggest fly in the amber is a surprise U.S.-China trade deal which would completely change the broad narrative," Wong said.
While new economic projections showed policymakers' views of growth and unemployment largely unchanged, policymakers saw headline inflation at just 1.5 percent for the year, down from the 1.8 percent projected in March.
They also expect to miss their 2 percent inflation target next year as well.
The long-drawn trade tussle between China and the United States has rattle global markets since it began and raised concerns of an economic recession.
The presidents of the world's two largest economies agreed to revive their troubled talks at a G20 meeting later this month. U.S. central bank is not alone in contemplating rate cuts. European Central Bank President Mario Draghi hinted on Tuesday that if inflation failed to pick up, more policy easing could be on its way. interest rates reduce the opportunity cost of holding non-yielding bullion.
"We think the recent rally in gold rally has been as a result of combination of two things, the trade issues and central banks cutting rates. I don't think these two have factored in completely yet," said Suki Cooper, precious metals analyst at Standard Chartered (LON:STAN) Bank.
Amongst other precious metals, silver XAG= rose 0.3 % to $15.05 per ounce, while platinum XPT= rose 0.7% to $804.88 per ounce.
Palladium XPD= gained 1.3% to $1,498.41 per ounce, having hit its highest since March 27 at $1,502.02 earlier in the session.