* Hedge funds reinforce worries about Deutsche Bank
* Analysts watching U.S. Treasury bond yields
* U.S. consumer spending unexpectedly falls in August (Adds U.S. personal income data; updates prices)
By Swetha Gopinath
Sept 30 (Reuters) - Gold rose on Friday as concerns about Deutsche Bank triggered a sharp sell-off in equities that undermined risk appetite, and mixed U.S. data indicated that the Federal Reserve might be cautious about raising interest rates.
Spot gold XAU= was up 0.47 percent at $1,326.26 an ounce by 1337 GMT. U.S. gold futures GCcv1 were up 0.29 percent at $1,329.80 an ounce.
A report that a number of hedge funds had withdrawn excess cash from Deutsche Bank DBKGn.DE reinforced worries about Germany's biggest lender. pan-European STOXX 600 .STOXX index was down about 0.4 percent, having earlier fallen to its lowest point since early August. .EU
"If there is a rush to safety, then gold is a top contender," said Hamza Khan, head of commodities strategy, at ING. "There are also fundamental drivers supporting gold prices, including demand from the Russian and Chinese central banks and uncertainty about the U.S. Federal Reserve raising rates."
Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar and making commodities more expensive for non-U.S.-firms.
U.S. consumer spending unexpectedly fell 0.1 percent in August, after accounting for inflation - the first time in seven months, while inflation showed signs of accelerating. polled by Reuters had expected a 0.1 percent gain in consumer spending, which accounts for more than two-thirds of U.S. economic activity. FRX/
The dollar trimmed gains and yields on U.S. government debt fell after the data.
Analysts are watching U.S. Treasury bond yields for clues to the direction of gold prices.
"There have been periods when gold rallied in spite of Fed policy tightening and periods when gold came under pressure," UBS analysts said in a note.
"What ultimately matters for gold are real rather than nominal yields ... While we expect the Fed to hike rates in December, we continue to think U.S. long-end real yields have room to fall further, supporting our positive gold view."
Gold is up more than one percent so far this month, partly because of the weaker dollar after the Fed chose not to raise interest rates. In August, gold fell more than 3 percent.
Silver XAG= was up nearly 3 percent at $19.61 an ounce. Platinum XPT= was up more than 1 percent at $1,034.24 an ounce and palladium XPD= was up nearly 2 percent at $724.40. Palladium touched a 7-week high of $725.10 on Friday.