PRECIOUS-Gold steadies as yuan holds onto gains versus the dollar

* Gains in dollar index limit upside for gold

* SPDR holdings hit lowest in a year, down 0.2 pct on Wednesday (Recasts, updates prices, adds details/quote; changes dateline)

LONDON, Aug 9 (Reuters) - Gold steadied on Thursday after two sessions of gains as a stronger dollar index weighed on upside momentum, though the precious metal took some comfort from a steadier yuan.

Gold has been highly correlated with the yuan in recent weeks, with the Chinese currency acting as a proxy for concerns about Sino-U.S. trade tensions.

The yuan steadied versus the dollar as dollar bulls remained wary of potential policy moves to stabilise the Chinese currency.

Against a currency basket, the dollar rose thanks to simmering geopolitical tensions around the world, though traders said the greenback needed fresh impetus or an escalation in trade tensions to move higher.

A strong dollar makes dollar-priced gold costlier for non-U.S investors.

"We don't have a lot of people interested in gold at the moment and that's reflected in the price. We need a change in dollar (direction) to take gold consistently higher," said Bank of America-Merrill Lynch analyst Michael Widmer.

He added, however: "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 weakening, and we'll have more concerns over trade."

Spot gold was up 0.1 percent at $1,214.51 an ounce at 1015 GMT, having gained 0.2 percent in the previous session. U.S. gold futures were up 0.1 percent at $1,222.50.

China said late on Wednesday it would slap retaliatory tariffs of 25 percent on $16 billion worth of U.S. imports.

Also on Wednesday, Washington said it would impose fresh sanctions on Russia after it determined Moscow had used a nerve agent against a former Russian agent and his daughter in Britain.

Gold, 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 U.S. Federal Reserve has raised interest rates two times this year and targets two more hikes. Higher U.S. rates tend to boost the dollar and treasury yields, adding pressure on greenback-denominated, non yielding gold.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.18 percent to 786.08 tonnes on Wednesday, hitting the lowest since August 2017.

Silver rose 0.5 percent to $15.46 an ounce, while platinum gained 0.9 percent to $833.99.

Palladium climbed 0.3 percent to $902.25 per ounce, after hitting a more than two-week low in the previous session. (Additional reporting by Apeksha Nair in Bengaluru Editing by Susan Fenton)