PRECIOUS-Fed's bumper rate cut fuels non-yielding gold's rally

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Bullion rose to record high of $2,599.92 on Wednesday

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Silver gains over 3%

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Silver market to remain in deficit over coming years - UBS

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Platinum, palladium up more than 2%

(Rewrites as of 0855 GMT)

By Ashitha Shivaprasad

Sept 19 (Reuters) - Gold prices climbed 1% on Thursday after the U.S. Federal Reserve embarked on an easing cycle by slashing interest rates and powering bullion to all-time highs, coming just a few cents shy of $2,600 in the previous session.

Spot gold rose 1% to $2,584.16 per ounce by 0855 GMT after scaling a record high of $2,599.92 on Wednesday. U.S. gold futures rose 0.4% to $2,609.70.

The U.S. central bank kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction as it gains "greater confidence" about inflation.

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.

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 3.6% to $31.13 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 2.4% to $991.55 and palladium gained 2.3% to $1,086.75. (Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Conor Humphries)