* US orders index misses forecast
* Fed now seen unlikely to raise rates this month
* Silver hits more than two-week high
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
(Updates prices, adds comment)
By Clara Denina
LONDON, Sept 6 Gold prices rose 1 percent on
Tuesday as more disappointing U.S. economic data reinforced
expectations the U.S. Federal Reserve will not raise interest
rates at its September policy meeting.
The U.S. non-manufacturing new orders index for August fell
to its lowest since December 2013.
Spot gold rose to a session high of $1,340.24 an
ounce and was up 0.9 percent at $1,338.36 an ounce by 1419 GMT,
while U.S. gold futures were 1.2 percent higher at
The metal hit a two-month low of $1,301.91 last Thursday on
prospects that a strong non-farm payrolls report for August
could put the Fed on track to raise rates soon. Gold bounced
back, however, when the data missed expectations.
"An isolated rate hike in September would not have a
substantial negative impact on gold," Danske Bank senior analyst
Jens Pedersen said.
"What would be important for the gold market is whether a
rate hike this year signals that now the Fed is ready to speed
up the hiking cycle, because then the whole normalisation of
rates would be back on the agenda."
Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding the non-yielding
asset while boosting the dollar, in which the metal is priced.
New U.S. data releases and any comments from Federal Reserve
officials will be watched closely for hints as to the timing of
any rate increases.
"We expect gold prices to trade within a $1,300-$1,350 range
for the coming quarters," ABN Amro analyst Georgette Boele said.
Although forecasting a 25 basis point rate hike by the Fed
in December, Boele said that modest growth and above-growth
inflation should be supportive of gold going into 2017.
ABN Amro on Tuesday revised its gold and silver price
forecasts for the year.
Spot silver touched a near three-week high of $19.67
Platinum was outperforming the rest of the complex,
up 2.2 percent at $1,094.60 an ounce. Palladium rose 1.1
percent to $685.47.
South Africa's biggest platinum mine workers' union and the
industry have failed to reach a deal on pay, the union said on
Monday, raising the prospect of industrial action in the world's
top producer of the white metal.
(Additional reporting by Nallur Sethuraman in Bengaluru and Jan
Harvey in London.; editing by Susan Thomas and Susan Fenton)