* Gold drops for second session, but still above $1,220
* Dollar up 0.1 percent vs basket of currencies
* U.S. ADP national employment data due at 1315 GMT
(Updates prices)
By Clara Denina
LONDON, March 2 (Reuters) - Gold dropped for a second
session on Wednesday as the dollar rose and global shares
strengthened after strong U.S. data rekindled speculation the
Federal Reserve could still raise interest rates this year.
Spot gold XAU= slipped 0.3 percent to $1,228.61 an ounce
by 1238 GMT, while U.S. gold futures GCcv1 for April delivery
were down 0.1 percent at $1,229.70 an ounce.
"We have seen oil markets stabilise, stocks move higher and
the dollar making a bit of headway over the past week and then
adding to that, we are looking at whether to readjust the
expectation for U.S. rate hikes," Saxo Bank senior manager Ole
Hansen said.
"But the reaction in gold is really benign. We are still in
the phase of investors filling their boots and that means the
retracement we are seeing in gold is likely to be used as a
buying opportunity."
Bullion has rallied about 16 percent this year,
rediscovering its role as a shelter for risk-averse investors in
the face of tumbling equities and fears of a global economic
slowdown.
On Wednesday, gold fell along with other assets perceived as
safer, including the Japanese yen, as a rally in stock markets
stoked some risk appetite.
Data showed U.S. manufacturing stabilised in February. A
separate report on construction spending showed activity scaled
a more than eight-year high in January.
The dollar was up 0.1 percent against a basket of
currencies, after hitting a one-month high versus the euro on
Tuesday.
Investors will be watching more U.S. data to gauge the
impact on stocks and the Fed's monetary policy, with the most
important release being non-farm payrolls on Friday.
While gold faces firm resistance at $1,250-$1,260, "the
market has built a solid and supportive base above $1,200" and
there is enough risk sentiment and uncertainty to support the
metal, HSBC said in a note.
"We are raising the top end of our trading range to $1,300
from $1,275 previously and believe the rally remains essentially
intact."
Flows into bullion-backed exchange-traded funds (ETFs)
continued to increase. Assets in SPDR Gold Trust GLD , the
world's top gold ETF, rose 1.15 percent on Tuesday to 786.20
tonnes, the highest since September 2014.
Among other precious metals, platinum XPT= fell 0.4
percent to $935 an ounce, while silver XAG= lost 0.1 percent
to $14.82 and palladium XPD= climbed 0.6 percent to $517.46.