* Gold bounces back after Friday's 1.3 pct drop
* Fed not expected to raise U.S. rates this week
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, April 25 (Reuters) - Gold rose on Monday as a retreat in the U.S. dollar helped to tempt back some buyers after the previous session's 1.3 percent slide, but moves were muted ahead of a Federal Reserve policy meeting this week.
The Fed is not expected to raise interest rates at its April 26-27 meeting, but markets will be looking for the U.S. central bank's take on the global economy and its monetary policy outlook. is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Spot gold XAU= was at $1,237.11 an ounce at 1340 GMT, up 0.4 percent, while U.S. gold futures GCv1 for June delivery settled up 0.8 percent at $1,240.20.
Prices are up nearly 17 percent this year as expectations of a Fed rate increase faded, the dollar softened and investors showed renewed interest in commodities.
"It all depends on the Fed for the time being," Julius Baer analyst Carsten Menke said. "Inflows into exchange-traded products have really leveled off in the second half of March and into April."
Global stocks, the dollar and oil prices fell as an unexpected drop in U.S. new home sales added to investor uncertainty over the economy's outlook ahead of U.S. and Japanese central bank policy meetings. MKTS/GLOB in this narrow band somewhere between $1,200 and $1,250. The market is really looking for guidance here," said Stefan Wieler, vice president of GoldMoney in Toronto.
"The gold market has anticipated that real interest rates move lower."
Economists expect the Fed to deliver a rate increase in June and follow up with another by the end of the year. But interest rate futures show less conviction, underscoring the wide gap between markets and policymakers on the path of rates. continue to bet on rising gold prices, with Friday's data showing that hedge funds and money managers raised their net long COMEX gold position to a 3-1/2-year high. expectations of a Fed hike in the next six months already low, the market already heavily long and physical demand muted, we see little reason to jump in and buy gold here," ICBC Standard Bank said in a note.
Among other precious metals, silver XAG= , which touched an 11-month high as it rallied 4.5 percent last week, was up just 0.1 percent at $16.95 an ounce.
Platinum XPT= was up 0.6 percent at $1,012.13 and palladium XPD= gained 0.1 percent to $600.95.
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