GLOBAL MARKETS-Oil falls on Goldman call, stocks mixed before Fed meeting

* Fed rate decision next week hangs in the balance

* Goldman slashes oil forecasts, crude falls

* Dollar drifts before possible U.S (Other OTC: UBGXF - news) . rate hike (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Sept 11 (Reuters) - Crude oil fell on Friday after Goldman Sachs (NYSE: GS-PB - news) slashed its price forecast through next year, while global equity markets traded mixed as investors assessed the economic outlook and a potential move by the Federal Reserve next week to raise interest rates.

A drop in U.S. consumer sentiment in September to its lowest in a year initially weighed on Wall Street, as the University of Michigan's preliminary reading for the month slid to 85.7, compared with the final reading of 91.9 in August and much lower than the median forecast of 91.2 of economists polled by Reuters.

Stocks in Europe fell but still recorded the biggest weekly rise since July. The pan-European FTSEurofirst 300 index closed down 1.0 percent at 1,401.07, and MSCI (NYSE: MSCI - news) 's all-country world stock index was flat.

Wall Street rebounded in thin trade ahead of the Fed's policy-setting meeting Sept. 16-17. The S&P 500 posted its biggest weekly gain since July.

A small majority of forecasters predict the Fed will raise rates for the first time in nearly a decade, even though models suggest concerns about market volatility and economic growth will delay monetary policy tightening.

A Reuters poll of 72 economists showed a slight majority expects rates to rise from the current 0-0.25 percent.

"The knee-jerk reaction on the Fed lift-off is negative," said Phil Orlando, chief equity strategist at Federated Investors in New York. "We think the Fed lift-off is a positive for the economy and stocks, because it means the Fed is rubber-stamping the fact they truly believe the economy is strong enough."

The Dow Jones industrial average closed up 102.69 points, or 0.63 percent, to 16,433.09. The S&P 500 rose 8.75 points, or 0.45 percent, to 1,961.04 and the Nasdaq Composite added 26.09 points, or 0.54 percent, to 4,822.34.

Goldman Sachs, Wall Street's most influential voice in oil trading, slashed its 2016 forecast for U.S. crude prices to $45 a barrel from $57 previously, and Brent to $49.50, down from $62, citing oversupply and concerns over China's economy.

Goldman also said while not its base case, crude could fall further, to near $20 a barrel.

U.S. crude futures' front-month contract settled down $1.29, or 2.8 percent, at $44.63 a barrel. The front-month in Brent, the global benchmark for oil, slid 75 cents, or 1.5 percent, to settle at $48.14.

U.S. Treasury prices rose despite the gain in stocks and as investors focused on whether the Fed will raise rates.

"It (Other OTC: ITGL - news) 's all about whether the Fed indicates that they are going to do some kind of tightening," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets in New (KOSDAQ: 160550.KQ - news) York.

Benchmark 10-year notes were last up 9/32 in price to yield 2.1884 percent.

German 10-year yields, the euro zone benchmark, were down 4 basis points at 0.66 percent on growing doubts that the Fed would raise interest rates next week.

The dollar was little changed in thin, listless trading ahead of next week's Fed meeting.

The dollar index, a basket of currencies valued against the dollar, fell 0.30 percent to 95.168.

(Additional reporting by Jamie McGeever; Editing by Nick Zieminski and Dan Grebler)