* Risk the Fed could surprise on rates
* Rise in bond yields a worry for gold bulls
* Strong technical support around $1,305 an ounce
* Coming up: Fed meeting Sept. 20-21, statement Wednesday
(Updates prices; adds comment, second byline, NEW YORK
By Marcy Nicholson and Pratima Desai
NEW YORK/LONDON, Sept 19 Gold prices rose on
Monday as the dollar slipped but gains were capped by jitters
ahead of a Federal Reserve monetary policy meeting and a rise in
U.S. government bond yields.
Spot gold was up 0.3 percent at $1,313.39 an ounce by
3:32 p.m. EDT (1932 GMT), compared with a low of $1,306.26 hit
on Friday, its weakest since Sept. 1. U.S. gold futures
settled up 0.6 percent at $1,317.80.
The U.S. central bank will start a two-day meeting on
Tuesday with a statement scheduled for 2 p.m. (1800 GMT) on
Wednesday. It is expected to keep benchmark rates on hold but
could give a clear signal of rises to come, possibly in
If rates remain unchanged, that could keep the U.S. currency
under pressure, potentially making gold more attractive to buy.
But higher rates would increase the opportunity cost of holding
gold that yields nothing.
"The dollar overall is down a little, which is positive for
precious metals and for gold in particular ... Economic data has
not been too good, so they do not need to act immediately," said
Quantitative Commodity Research analyst Peter Fertig.
Worrying for gold bulls is the rise in real yields, such as
those earned on U.S. inflation-linked bonds, making it harder to
justify holding gold.
It is "concerning that the recent move higher in bond yields
has also seen a move higher in real yields," Macquarie analysts
wrote in a note. "Gold has in fact stood up well so far ... The
recent rise in real yields is more consistent with a gold price
nearer $1,250/oz than today's $1,315/oz."
However, the return of Chinese investors after the
Mid-Autumn Festival is expected to help bolster gold, as is
strong technical support around $1,305, the 100-day moving
Among other precious metals, spot silver rose 1.9
percent at $19.12 an ounce while the gold/silver ratio fell to
"At the current ratio, silver prices may look overpriced
versus gold, leaving the market poised for a correction," said
Citi Research in a note.
"Despite repeatedly testing $20/oz since the start of
second-half 2016, we believe silver prices are unlikely to see
significant further upside from here."
Spot palladium was up 1.9 percent at $682.97, on
follow-through strength from data on Friday that showed
faster-than-expected growth in U.S. consumer prices, raising
expectations for autocatalyst demand, said Eli Tesfaye, senior
market strategist for RJO Futures in Chicago.
Platinum rose 0.7 percent at $1,021.60.
(Additional reporting by Swati Verma and Sethuraman N R;
Editing by Louise Heavens and James Dalgleish)