PRECIOUS-Gold firms on weaker dollar; palladium holds near record high

    * Dollar index falls to lowest in nearly eight weeks
    * Palladium hit record high of $2,925.14 on Friday

 (Recasts, adds comment, updates prices)
    By Sethuraman N R
    April 26 (Reuters) - Gold prices held firm on Monday,
supported by a weaker dollar ahead of the U.S. Federal Reserve's
meeting this week, while supply worries kept palladium near
record highs hit in the previous session.
    Spot gold        was up 0.1% at $1,779.73 an ounce by 0931
GMT. U.S. gold futures        rose 0.1% to $1,779.60.
    "We have seen some short-term buying interest come back into
the market in line with the weaker dollar and lower bond yields.
But if we fail to break higher soon, then there is a risk we
could run into some renewed period of profit taking," said Saxo
Bank analyst Ole Hansen.
    "The main focus this week will be the FOMC (Federal Open
Market Committee) meeting on Wednesday and what kind of signals
that will be sent from there."
    Gold prices have not been able to move forward despite a
weaker dollar and lower U.S. Treasury yields because of the
metal's failure to break above the psychological $1,800 barrier,
analysts said. 
    The dollar slumped to an almost eight-week low against other
major currencies on Monday.       
    Market participants are awaiting the Fed's two-day policy
meeting starting on Tuesday, with the focus on the tapering of
bond purchases.             
    Spot gold could retest resistance at $1,792 an ounce, having
stabilised around a support at $1,772, said Reuters technical
analyst Wang Tao.             
    Palladium        rose 1.2% to $2,888.75 an ounce after a
record peak of $2,925.14 on Friday.
    "The (palladium) price is finding tailwind from the prospect
of a renewed supply deficit," Commerzbank analysts said in a
    "This (higher price) is the result of robust demand from the
automotive industry due to tougher emissions regulations for
cars with combustion engines coupled with reduced supply."
     Silver        rose 0.3% to $26.07 an ounce while platinum
       was up 0.5% at $1,236.

 (Reporting by Nallur Sethuraman in Bengaluru
Editing by David Goodman)