Gold rebounded from earlier losses to above $1,600 an ounce on Wednesday, as poor economic data in the eurozone added to worries over the debt crisis in Cyprus, triggering some demand for safe havens.

The euro hit a four-month low against the U.S. currency, helping lift the dollar index to a 7-1/2-month high, as worries grew that the Cyprus rescue will prove a template for future bailouts, making private investors foot the bill.The metal had started the day on the back foot, tracking a weaker euro and European shares and was still vulnerable to declines, traders said.

Spot gold rose 0.2 percent to $1,602 an ounce by 1346 GMT, snapping three consecutive sessions of losses. It hit its weakest since March 15 at $1,589.49 on Monday.Prices were on course for their first monthly gain - up around one percent so far - after posting declines in every month since October.

U.S. gold futures for April delivery rose 0.4 percent to $1,601.40.Gold moved above $1,600 as there is a lot of uncertainty in Europe due to Cyprus situation... people don’t know how things will unfold and that uncertainty helps gold, while euro zone data was also bad,” Bernard Sin, senior vice president at MKS Capital, said.“The gold market is still vulnerable to losses and may be taking the cue from the euro, which is a sell, as we head towards the Easter break.”

The first fall in euro zone economic confidence after four months of gains in March stacked on top of an ongoing slump in Italianmanufacturing and retail sales and a confirmation that France’s economy contracted at the end of last year.Stock markets in Europe fell, also under pressure from concerns over Cyprus and sluggish demand for Italian debt.Cyprus is expected to complete capital control measures to prevent a run on the banks by depositors anxious about their savings before reopening its banks on Thursday.

TRADING THINS

Trading was expected to thin ahead of the Easter holiday break, analysts said. Liquidity should return next week, when an ECB policy meeting and U.S. non-farm payrolls will be the main economic events.While gold may remain on the defensive in the near term, especially as trading conditions may be thin going into the holiday weekend, we continue to expect high levels of global liquidity to eventually buoy gold prices,” HSBC anlayst James Steel said in a note.

Reflecting the stalled momentum in gold, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged at 1,221.260 tonnes for the third session on March 26.Activity in Asia’s physical gold market slowed to a trickle as prices bounced in a small range, dealers said.

Spot silver dropped to a more than three-week trough of $28.22 but later edged up to $28.34, down 1.3 percent on the day. The popular Shanghai silver forward lost nearly 2 percent to a three-month low of 5,860 yuan a tonne.

Platinum and palladium also faltered. Spot platinum lost 0.1 percent to $1,572.74. Spot palladium inched down 0.6 percent to $756.22.Palladium has been trading sideways over the past four sessions,” UBS said in a note. “As the broader bull trend is still in place, we will be watching for a closing break above resistance at $764.46, the 62 percent retracement of the latest sell-off.”