(Adds comment, updates prices)
* Fed policymakers see two rate hikes in 2019 vs four in 2018
* Palladium hits record high at $1,283.49/oz
* Gold falls from over five-month peak
* SPDR gold holdings climb to 4-month highs
* GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl
By Arijit Bose and Sethuraman N R
BANGALURU, Dec 19 (Reuters) - Gold prices fell on Wednesday, giving up earlier gains as the dollar recovered after the U.S. Federal Reserve raised interest rates and noted that “some” rate hikes would be needed next year, a more aggressive stance than many expected.
The central bank, after its last policy meeting of the year, said the U.S. economy has been growing at a strong rate and the job market has continued to improve. Economic forecasts released on Wednesday showed policymakers expect two rate hikes next year and one the following year.
Gold fell 0.5 percent $1,243.25 at 3:16 pm EST (2016 GMT). The session high of $1,258.03 was its highest since July 10.
U.S. gold futures fell 0.5 percent to $1,247.50 an ounce.
“The U.S. Federal Reserve has gone ahead and raised interest rates, which is a temporary pullback for gold,” said George Gero, managing director at RBC Wealth Management.
“The outlook for two rate hikes next year is not dovish enough, gold will be a little bit range-bound lower until we see what the effects will be from Brexit, Washington budget talks and global politics.”
The dollar pared some losses after the Fed statement as investors had bet signs of global economic headwinds would prompt the Fed to signal a slower pace of interest rate hikes next year.
U.S. President Donald Trump, who has berated the Fed over rate hikes, tweeted on Tuesday it was “incredible” for the central bank to consider tightening given global economic uncertainties.
After the policy statement, Fed Chairman Jerome Powell said there “is a fairly high degree of uncertainty about the path of rates.”
“Powell’s comments indicate that there is more uncertainty now as the Fed is close to the lower end of the neutral rate and further rate hikes will be more data driven,” said Tai Wong, head of base and precious metals derivatives trading at BMO.
Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund rose 1.1 percent to 771.79 tonnes on Tuesday, the highest since Aug. 20.
Palladium hit a record high of $1,283.49 early in the session and was up 1.8 percent at $1,266 an ounce.
“The ability of the market to come back after selloffs reaffirms its underlying tight fundamentals,” HSBC analyst James Steel wrote in a note on Dec. 18.
Silver fell 0.4 percent to $14.58, while platinum fell 0.1 percent to $785.90 an ounce. (Reporting by Nallur Sethuraman, Arijit Bose in Bengaluru; Editing by Diane Craft, Tom Brown and David Gregorio)