PRECIOUS-Gold set to fall for 4th day as euro, stocks slide

* Euro slides to 4-mth low vs dollar on Italy, Cyprus worries

* Physical market interest thin on listless price movement

* Spot silver drops to 3-week low on technical selling

(Updates throughout, changes dateline from SINGAPORE)

LONDON, March 27 (Reuters) - Gold fell for a fourth day on Wednesday, tracking losses in the euro and European shares after soft demand at an Italian debt auction added to worries over the debt crisis in Cyprus, while the dollar benefited from positive U.S. economic data.

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.

Spot gold was down 0.4 percent to $1,592.44 an ounce by 1046 GMT, on course for a fourth session of losses, matching a similar run in late February and early March. It hit its weakest since March 15 at $1,589.49 on Monday.

Prices were however still on course for their first monthly gain - up around 0.9 percent so far - after posting declines in every month since October.

U.S. gold futures for April delivery dropped 0.3 percent to $1,591.60.

"The focus will remain on Cyprus and its developments in coming sessions," Danske Bank analyst Christin Tuxen said

"The U.S. data was fairly strong yesterday and there is a picture now that the United States is leading the global economic recovery, alongside China of course, which is comforting for investors who would otherwise be looking for the safe havens like gold."

Orders for long-lasting U.S.-made goods surged last month and home prices posted their biggest year-on-year gain in six-and-a-half years in January, the latest signs the U.S. economy regained momentum early in the first quarter.

Upbeat U.S. data in recent months has boosted confidence in the recovery of the world's top economy, driving investors to high-yielding assets such as equities, while minimal inflationary pressure has muted gold's appeal as a hedge against rising prices.

Stock markets in Europe surrendered early gains to drop sharply midmorning, 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.

In other precious metals, spot silver dropped to a more than three-week trough of $28.22 but later edged up to $28.30, down 1.4 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 0.4 percent to $1,570. Spot palladium inched down one percent to $752.52.

"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."

Palladium has not closed above that level since March 15.

(Editing by Jan Harvey and Keiron Henderson)