PRECIOUS-Gold gains ahead of U.S. inflation data

* Fed more focused on employment than inflation - analyst

* Palladium hits lowest level since August 2020 (Updates prices)

Sept 13 (Reuters) - Gold prices rose on Monday in the run-up to the release of key U.S. economic data including readings on inflation that could dictate the direction of the Federal Reserve’s monetary policy.

Spot gold rose 0.3% to $1,792.05 per ounce by 1:40 p.m. EDT (1740 GMT), while U.S. gold futures settled up 0.1% at $1,794.4.

Focus will be on the monthly U.S. consumer price index, the Fed’s preferred gauge of inflation, due on Tuesday. The August retail sales and production figures are also set for release this week.

The Fed’s emphasis is on employment and it is not particularly worried about inflation, presupposing an accommodative stance that is positive for gold, said Bart Melek, head of commodity strategies at TD Securities.

Melek, however, said it could “be tough for gold to take off” as the dollar remains strong, keeping market attention on what the Fed would do at its next meeting from Sept. 21 to 22.

Gold is seen as a hedge against inflation and currency debasement but also contends with the greenback for safe-haven status.

The dollar index hit a multi-week high on Monday, raising bullion’s cost for holders of other currencies.

Cleveland Fed President Loretta Mester said on Friday she would still like the central bank to begin tapering asset purchases this year, joining a chorus of policymakers stating plans to begin scaling back support despite weaker jobs growth in August.

Citi Research said in a note that it maintained a slightly hawkish bias heading into the Sept. 21 meeting, but a dovish surprise could allow gold to break higher towards $1,900.

Silver was steady at $23.71 per ounce and platinum rose 0.5% to $960.18, while palladium fell 2.6% to $2,083.46, after hitting its lowest level since August 2020. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Aditya Soni and Vinay Dwivedi)