* Analysts say $1,300 unlikely to be tested in short term
* Goldman sees limited gold upside, few Fed surprises
(Updates prices, adds comment)
By Clara Denina
LONDON, May 11 (Reuters) - Gold rebounded from two-week lows
on Wednesday as the dollar's rally paused and global shares
fell, rekindling investors' appetite for the precious metal.
Spot gold XAU= rose 0.8 percent to $1,277.56 an ounce by
1447 GMT, while U.S. gold for June delivery GCcv1 gained 1
percent to $1,278.10 an ounce. The metal touched a low of
$1,257.25 on Tuesday, its weakest since April 28.
"Gold has held technical support at $1,260, which is a
positive sign, but we would have to wait for more U.S. economic
data and the consequent impact on the dollar to see whether we
can consistently exit the $1,220-$1,260 range," ActivTrades
chief analyst Carlo Alberto de Casa said.
The dollar slipped 0.5 percent against a basket of major
currencies .DXY , making dollar-priced assets such as gold
cheaper for holders of other currencies. MKTS/GLOB
Gold reached a 15-month high of $1,303.60 last week, before
surrendering to the general strength of the dollar.
Analysts see $1,300 as a tough barrier in the short term, as
the metal has already risen 20 percent since the start of the
year, bolstered by strong physical inflows and receding
prospects in the near-term of an increase in U.S. interest
rates.
"We do have a number of drivers that should give fundamental
support for gold and are definitely capping the downside but
gold has come along quite a bit this year so I can't see it
breaching the $1,300 level more permanently when the dollar has
increased so much," Danske Bank senior analyst Jens Pedersen
said.
Gold is supported largely by expectations the next U.S.
interest rate increase will only happen later in the year as Fed
policymakers take note of challenging global economic
conditions, Mark To, head of research at Wing Fung Financial
Group said.
"The current situation is favourable to gold but it is not
overwhelmingly favourable," he said, adding the U.S. economy
appeared to be in good shape overall. "That's why people take
some profits along the way."
Goldman Sachs (NYSE:GS) also sees "limited upside for gold pricing
given the limited room for the Fed to surprise to the downside,
limited room for the dollar to depreciate, and limited room for
China to drive (emerging markets) currency strength to
contribute to dollar weakness."
Goldman however increased its gold price forecasts for
coming months, citing stronger net speculative positioning.
Other precious metals also advanced, with spot silver XAG=
gaining 2.3 percent to $17.48 an ounce, platinum XPT= up 2.2
percent at $1,069.39 and palladium XPD= rising 2.8 percent to
$607.35.