Oct 4 (Reuters) - Gold prices hit a near two-week peak on Monday, as a weaker dollar offset bets that the U.S. Federal Reserve could begin tapering its pandemic-era asset purchases soon. FUNDAMENTALS * Spot gold rose 0.2% to $1,764.60 per ounce by 0112 GMT, after hitting $1,765.54, its highest since Sept. 23. U.S. gold futures gained 0.4% to $1,764.90. * The dollar index, dropped to its lowest since Sept. 29, making gold cheaper for buyers holding other currencies. * The U.S. Federal Reserve may be close to meeting the inflation mandate set for raising interest rates, Philadelphia Fed Bank President Patrick Harker said, but it may be a year or longer before the central bank’s employment goal is met to allow for an actual rate increase. * The Fed’s conditions for raising interest rates could be met by the end-2022, Cleveland Fed Bank President Loretta Mester said on Friday, adding, she expects inflation to come back down to the central bank’s target next year. * Gold is traditionally seen as an inflation hedge, although reduced central bank stimulus and interest rate hikes tend to push government bond yields up, in turn translating into a higher opportunity cost for gold that pays no interest. * SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings slipped 0.4% to 986.54 tonnes on Friday. * Demand for physical gold also picked up in top consumer China last week and there was increased activity in other Asian hubs including Singapore. * Speculators cut net long positions by 19,471 contracts to 42,123 in the week to Sept. 28, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday. * Silver XAG= was up 0.4% at $22.62 per ounce. * Platinum XPT= rose 0.4% to $976.08 and palladium XPD= edged 0.1% up to $1,921.72. DATA/EVENTS (GMT) 1400 U.S. Factory Orders Aug Reporting by Nakul Iyer in Bengaluru; Editing by Rashmi Aich Our Standards: The Thomson Reuters Trust Principles.