Jan 21 (Reuters) - Gold prices inched up on Monday on expectations that the U.S. Federal Reserve will pause its multi-year interest rate hike cycle, but gains were limited by a recovery in investor appetite for risk.
FUNDAMENTALS
* Spot gold XAU= had risen 0.2 percent to $1,282.71 per ounce by 0103 GMT, while U.S. gold futures GCv1 were steady at $1,282.50 per ounce.
* "Patience" is the new mantra at the Fed, less than two weeks ahead of the U.S. central bank's first policy meeting of the new year, as officials leave little doubt they want to stop raising interest rates - at least for a while. Slower global growth, a stock meltdown last quarter, and a partial U.S. government shutdown that threatens consumer confidence and spending have many in the Fed worried about what the central bank's policymakers only last month called "strong" economic activity. And, they say, the economy has yet to feel the full effects of the Fed's four rate hikes last year.
* Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding non-yielding bullion. Lower interest rates also tend to weigh on U.S. yields and the dollar, in which gold is priced.
* U.S. manufacturing output increased by the most in 10 months in December, boosted by a surge in the production of motor vehicles and a range of other goods, which could allay fears of a sharp slowdown in factory activity. Asian markets were in limbo early on Monday ahead of data likely to show the Chinese economy slowed at the end of last year, underlining the urgent need for more stimulus as Beijing wrestles with the United States over trade. MKTS/GLOB
* China is expected to report that economic growth cooled to its slowest in 28 years in 2018 in the face of weakening domestic demand and bruising U.S. tariffs. U.S. President Donald Trump said on Saturday there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs. Investors are also waiting to hear British Prime Minister Theresa May's 'Plan B' for Brexit which is due to be presented to parliament later on Monday. Gold demand turned fragile last week in India as local prices jumped to their highest level in 2-1/2 years, while traders in major buying centres in Asia pinned their hopes on purchases ahead of the approaching Lunar New Year. Holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, rose 1.51 percent to 809.76 tonnes on Friday from 797.71 tonnes on Thursday. GOL/ETF
* Russia has overtaken China to become the world's fifth largest official sector holder of gold as Western sanctions drove buying by its central bank to record highs in 2018, its data showed on Friday.