PRECIOUS-Gold rises as investors bet on dovish U.S. Fed stance

    * U.S. Fed's policy decision due at 1800 GMT
    * Palladium down more than 1%
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 (Updates prices)
    By Nakul Iyer
    Sept 16 (Reuters) - Gold prices rose on Wednesday, helped by
a subdued dollar as investors bet on dovish monetary cues from
the U.S Federal Reserve when it announces its policy decision
later today.    
    Spot gold        was up 0.4% to $1,963.97 per ounce by 1131
GMT, while U.S. gold futures         rose 0.4% to $1,973.50 per
    "What we're probably seeing building in gold here is the
expectation that the Fed is going to be more dovish than in the
past, and the realization that we're seeing slightly more
inflationary pressure than anticipated," said OANDA analyst
Craig Erlam.  
    While the Fed does not need to announce stimulus measures
now, it will have to lay the groundwork for potential stimulus
later, he added. 
    Making bullion more attractive for those buying the metal in
other currencies, the dollar index        fell in the run-up to
the Fed decision at 1800 GMT.       
    The meeting is its first since the central bank took a more
relaxed stance on inflation last month. The policy announcement
will be followed by a news conference by Chairman Jerome Powell
half an hour later.
    "Markets will want to see if the Fed will modify its
language as some expect, perhaps something to the effect that it
will keep rates low for a period of time (say three years) or
maybe do the same thing with its inflation language," ED&F Man
Capital Markets analyst Edward Meir said in a note.
    "But, we doubt the Fed will lock itself into such a fixed
language ahead of a potential turn in the U.S. economy."
    Lower U.S. interest rates tend to weigh on bond yields and
the dollar, bolstering the appeal of non-yielding gold, which is
also seen as hedge against inflation and currency debasement.
    Elsewhere, silver        rose 0.1% to $27.27 per ounce,
while platinum        fell 0.9%, to $969.83 and palladium       
slipped 1.2% to $2,381.82 per ounce. 

 (Reporting by Nakul Iyer and Brijesh Patel in Bengaluru;
Editing by Jan Harvey)