* Stocks gain as S&P 500 breaks through key level
* Gold sets new high, CRB commodity index at 8-month peak
* Bonds score slight gains before Fed meeting on Tuesday
* Dollar slips versus euro, yen ahead of Fed statement (Updates with close of U.S. markets, adds byline)
By Herbert Lash and Walter Brandimarte
NEW YORK, Sept 20 (Reuters) - World stocks jumped as the U.S. benchmark S&P 500 index broke above a key level on Monday, lifted by optimism over corporate news, but the dollar slipped on fears the struggling U.S. economy needs further stimulus.
The S&P 500 <.SPX> closed at a four-month high a day before a meeting of the Federal Reserve in which policy-makers are expected to renew a pledge to keep the Fed's portfolio from shrinking yet not take new steps to ease monetary policy. For details see: [ID:nN20274583]
The dollar slipped broadly as investors positioned for the possibility that Fed policy-makers may suggest the need to inject more money into the U.S. economy.
The S&P 500 has been unable to make a sustained move above 1,130 level, which has been the upper end of a range that has persisted since June. The index closed up 1.5 percent, almost 13 points above the resistance level.
The index's gains could be a shot in the arm if investors are swayed to believe that September's rally of 8.9 percent by the S&P has further to go.
"We've been waiting for this level to be penetrated, and breaching it makes it hard to be too negative right now," said Frank Gretz, market analyst and technician at Shields & Co in New York.
IBM
Volume was light with about 7.16 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of about 9.65 billion.
The Dow Jones industrial average <.DJI> closed up 145.77 points, or 1.37 percent, at 10,753.62. The Standard & Poor's 500 Index <.SPX> was up 17.12 points, or 1.52 percent, at 1,142.71. The Nasdaq Composite Index <.IXIC> was up 40.22 points, or 1.74 percent, at 2,355.83.
MSCI's All-Country World Index <.MIWD00000PUS> rose 1.3 percent, while the December futures contract for the Nikkei 225 stock index <0#NK:> trading in Chicago was down 10 points at 9,710.
Oil jumped 2 percent and sharp gains in cotton, corn and soybeans helped boost the Reuters-Jefferies CRB <.CRB> commodities index to eight-month highs. Gold extended record highs for a third session in a row. [ID:nN20267591]
U.S. crude for October
U.S. November crude
ICE Brent for November
The CRB index, which tracks commodity prices across 19 mostly U.S.-traded futures markets, soared to its highest level since Jan. 20. [ID:nN20266604]
Spot gold
A weak dollar helps boost prices of commodities denominated
in the greenback, making them more attractive to users of
currencies such as the euro
The chance that the Fed may boost money supply, in a move called quantitative easing, which would push benchmark yields lower and hurt the return of U.S. dollar-assets -- highlighted differences in policy among major central banks.
The Australian dollar hit a two-year high on hawkish Reserve Bank of Australia comments.
"The consensus is that the Fed won't do anything tomorrow, but if they indicate that more QE may be on the way, it would send a strong signal to sell the dollar during the week," said Kasper Kirkegaard, a currency strategist at Danske in Copenhagen.
The dollar was down against major currencies, with the U.S. Dollar Index <.DXY> down 0.12 percent at 81.318.
The euro
Prices of long-dated U.S. Treasuries rose before the Fed meeting.
The benchmark 10-year U.S. Treasury note