* Dollar weakens ahead of Fed statement at 1800 GMT
* Technical resistance seen at $1,321.60
(Updates throughout, adds London dateline) LONDON, Sept 20 (Reuters) - Gold prices rose on Wednesday, aided by a weaker dollar ahead of a U.S. Federal Reserve policy announcement at 1800 GMT that could signal whether it will raise interest rates for a third time this year. A threat by U.S. President Donald Trump to "totally destroy" North Korea also helped to push the dollar lower while stimulating demand for gold, seen as a safe investment in times of uncertainty. A weaker dollar makes gold cheaper for holders of other currencies.
Spot gold was up 0.3 percent at $1,315.27 an ounce by
1006 GMT, having hit a 2-1/2 week low on Monday at $1,304.10.
U.S. gold futures for December delivery were up 0.6
percent at $1,319. "The dollar is under pressure ahead of the Fed," said ABN AMRO analyst Georgette Boele. "But I think it's more to do with the comments from Mr Trump, which are affecting the dollar and indirectly gold as well." The Fed is expected to say that it will start to reduce its balance sheet, and investors will scour its forecasts and a news conference by Chair Janet Yellen for clues on the interest rate outlook. Gold is sensitive to rising rates because they increase bond yields, making non-yielding assets such as bullion less attractive while also tending to boost the dollar, in which gold is priced. Markets are pricing in a 56 percent probability of the Fed raising rates in December. "We suspect that the central bank will reiterate its dovish stance and likely weaken the dollar in the process," INTL FCStone analyst Edward Meir said in a note. "We could see a modest bounce in gold over the next day or two, but nothing that will take the precious metal outside of a relatively tight trading range for the time being." A range of $1,300-$1,290 would be a good base for gold unless the Fed changes its stance on interest rates, said one precious metals trader in Sydney, adding that geopolitical risks would support prices. Technical fibonacci support was around $1,300 with resistance at $1,321.60, ScotiaMocatta analysts said in a note.
In other precious metals, silver was up 0.3 percent
at $17.38 an ounce.
Platinum gained 0.8 percent to $955.30 and palladium
was flat at $908.40.
(Additional reporting by Apeksha Nair in Bengaluru; Editing by David Goodman)