By Clara Denina
LONDON (Reuters) - Gold steadied above $1,220 an ounce on Wednesday as the dollar's rally paused and global political tensions intensified, but investors remained cautious ahead of U.S. economic data later in the week.
Spot gold, stronger initially, was down 0.1 percent at $1,221.40 an ounce by 1156 GMT. It had rebounded from an 8-1/2-month low of $1,208.36 in the previous session as the dollar fell from a 10-week rise.
U.S. gold futures were unchanged at $1,221.70 an ounce.
"The dollar rally has come to a halt a bit and at that point yields in the U.S. have also started to come down and the immediate threat for precious metals has faded somewhat," ABN Amro analyst Georgette Boele said.
"We don't think this is a turnaround and more U.S. data this week should show more economic strength and lift the dollar back."
The dollar was up 0.1 percent against a basket of main currencies, still near a four-year peak after upbeat U.S. manufacturing and factory employment data, bolstered views of sturdy economic growth this quarter.
Strong U.S. economic readings have fuelled speculation of an earlier-than-expected rate increase in the United States that would discourage investment in non-interest-bearing assets such as bullion.
The market is likely to monitor the release of U.S. durable goods and GDP data on Thursday and Friday.
European equities traded mixed as support from the European Central Bank's renewed pledge to keep monetary policy loose was offset by weak German economic data, tepid corporate results and U.S.-led strikes in Syria.
The United States and its Arab allies bombed militant groups in Syria for the first time on Tuesday, opening a new front amid shifting Middle East alliances and sapping demand for riskier assets.
Gold is traditionally seen as a safer bet during times of political uncertainty, but the support gained from international tensions in Ukraine and the Middle East so far this year has often been short-lived.
Investor interest in gold remained weak. SPDR Gold Trust, the world's top gold-backed exchange-traded fund, said its holdings fell 1.2 tonnes to 773.45 tonnes on Tuesday - the lowest since December 2008 and the third straight drop.
Sluggish physical demand in Asia could weaken support for any price rally and would fail to provide a floor if prices were to decline.
The fourth quarter is usually a strong period for demand in Asia as consumers in China and India buy for festivals and weddings. But expectations of a further price drop could keep some away.
Silver fell 0.4 percent to $17.67 an ounce after slipping to a four-year low of $17.30 on Monday.
Platinum was up 0.5 percent at $1,331.24 an ounce, and palladium gained 0.9 percent to $819.25 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson and Louise Heavens)
