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Gold rose on Monday, supported by a weaker dollar ahead of the U.S. Federal Reserve policy meeting and a resurgence in Chinese buying after the metal hit a two-week low in the prior session.

"They (China) have been out of the market for two days and obviously liked these levels and are buying. Some stops were triggered on the upside," a Hong Kong-based trader said.

Gold has seesawed for the last week purely because of the fact that market watchers are waiting for the Fed meeting later this week," said OCBC Bank analyst Barnabas Gan. "Do expect gold prices to be extremely volatile towards the meeting."

Speculators lowered their net long positions in COMEX gold contracts in the week to Sept. 13, U.S. Commodity Futures Trading Commission data showed.

The sharp rise in the price of gold could be weighing demand for the yellow metal in India, one of the top two gold consuming nations in the world. Analysts from Commerzbank say in a note that by their calculations, August gold imports into India fell 81% compared to last year. They add that total imports in the first eight months of the year fell by 300 tonnes. “It would not be appropriate to blame only the numerous restrictions imposed by the government, either, as these were already in place last year. Clearly buyers are price-sensitive and not willing to pay the sharply risen gold prices. Although we are confident that imports will soon recover again thanks to the wedding and festival season in India, the gold price will also lack support from this side in the near future,” they say.

Reference: Reuters, Kitco