* Gains in dollar index limit upside for gold
* Gold seen in holding pattern until more data emerges (Updates prices, headline; adds comment, byline, CHICAGO dateline previous dateline LONDON)
By Renita D. Young and Maytaal Angel
CHICAGO/LONDON, Aug 9 (Reuters) - Gold was near flat on Thursday after two straight sessions of gains as a stronger U.S. dollar index weighed on upside momentum, though the precious metal took some comfort from a steadier Chinese currency.
Gold has been highly correlated with the yuan in recent weeks, with the Chinese currency acting as a proxy for concerns about U.S.-China trade tensions.
The yuan steadied against the dollar CNY=CFXS as greenback bulls remained wary of potential policy moves to stabilize the Chinese currency. .SS
The dollar rose against a basket of major currencies as geopolitical tensions faded, though traders said the greenback needed fresh impetus or an escalation in trade tensions to move higher. FRX/
A strong dollar makes dollar-priced gold costlier for non-U.S investors.
"Right now, gold is in a holding pattern until you get a little bit more of data," said Josh Graves, senior commodities strategist at RJO Futures.
He noted U.S. jobless claims came in lower than expected in the latest week, signifying a stronger economy and little necessity for safe-haven bids, like non-yielding gold. Consumer Price Index figures, which gauge inflation on consumer expenses, are expected early on Friday.
"We still think (gold) will move higher in the second half because the dollar will weaken a bit, the Chinese government is trying to stop the yuan (from) weakening, and we'll have more concerns over trade," said Bank of America-Merrill Lynch analyst Michael Widmer.
China said late on Wednesday it would slap retaliatory tariffs of 25 percent on $16 billion worth of U.S. imports. said it would impose fresh sanctions on Russia after it determined Moscow used a nerve agent against a former Russian agent and his daughter in Britain. a traditional safe haven, has largely failed to benefit from rising geopolitical tensions this year, as investors have chosen the safety of the dollar over the precious metal.
The Federal Reserve has raised U.S. interest rates twice this year and has targeted two more hikes. Higher U.S. rates tend to boost the dollar and Treasury yields, adding pressure on greenback-denominated, non-yielding bullion.
Palladium XPD= increased 0.7 percent to $906 per ounce, after hitting a more than two-week low in the previous session.
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