* US orders index misses forecast
* Fed now seen unlikely to raise rates this month
* Silver hits more than two-week high
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices, adds comment)
By Clara Denina
LONDON, Sept 6 (Reuters) - Gold prices rose 1 percent on Tuesday as more disappointing U.S. economic data reinforced expectations the U.S. Federal Reserve will not raise interest rates at its September policy meeting.
The U.S. non-manufacturing new orders index for August fell to its lowest since December 2013. gold XAU= rose to a session high of $1,340.24 an ounce and was up 0.9 percent at $1,338.36 an ounce by 1419 GMT, while U.S. gold futures GCcv1 were 1.2 percent higher at $1,342.80.
The metal hit a two-month low of $1,301.91 last Thursday on prospects that a strong non-farm payrolls report for August could put the Fed on track to raise rates soon. Gold bounced back, however, when the data missed expectations. isolated rate hike in September would not have a substantial negative impact on gold," Danske Bank senior analyst Jens Pedersen said.
"What would be important for the gold market is whether a rate hike this year signals that now the Fed is ready to speed up the hiking cycle, because then the whole normalisation of rates would be back on the agenda."
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which the metal is priced.
New U.S. data releases and any comments from Federal Reserve officials will be watched closely for hints as to the timing of any rate increases.
"We expect gold prices to trade within a $1,300-$1,350 range for the coming quarters," ABN Amro analyst Georgette Boele said.
Although forecasting a 25 basis point rate hike by the Fed in December, Boele said that modest growth and above-growth inflation should be supportive of gold going into 2017.
ABN Amro on Tuesday revised its gold and silver price forecasts for the year. silver XAG= touched a near three-week high of $19.67 an ounce.
Platinum XPT= was outperforming the rest of the complex, up 2.2 percent at $1,094.60 an ounce. Palladium XPD= rose 1.1 percent to $685.47.
South Africa's biggest platinum mine workers' union and the industry have failed to reach a deal on pay, the union said on Monday, raising the prospect of industrial action in the world's top producer of the white metal. GRAPHIC-2016 asset returns:
http://reut.rs/1WAiOSC
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