* ECB leaves rates on hold as expected; Draghi remarks eyed
* Dollar rises after bold Bank of Japan easing
* European stocks recover after Spanish bond auction (Updates throughout, changes dateline from SINGAPORE)
By Clara Denina
LONDON, April 4 (Reuters) - Gold hit a 10-month trough below $1,540 an ounce on Thursday as the dollar strengthened ahead of a statement by European Central Bank chief Mario Draghi, after the bank left rates on hold as expected at its latest policy meeting.
The statement will be closely watched for clues on monetary policy. Gold, which benefits from loose monetary policy, earlier failed to capitalise on surprisingly strong easing steps by the Bank of Japan.
Spot gold fell as low as $1,539.74 an ounce, its lowest since May 30, and stood at $1,546.90 by 1200 GMT, down 0.7 percent. On the charts, the next downside target stands at the May low of $1,527, traders said.
U.S. gold for June delivery fell 0.4 percent to $1,546.70.
"Gold is suffering from dollar strength ahead of the ECB, which is unlikely to deliver any surprise again today," VTB Capital analyst Andrey Kryuchenkov said.
"At this point it's all about sentiment and if bailout talks in Cyprus, tensions in North Korea and BoJ monetary easing have not triggered buying it is difficult that we will see a turnaround in prices any time soon."
The dollar strengthened against the euro after euro zone services PMI data showed continued contraction in the sector in March, heaping more focus on the ECB.
Draghi's statement will be closely watched for any signals about the bank's preparedness to lower borrowing costs for the 17-country euro zone in the coming months.
The U.S. currency also gained against the yen after the Bank of Japan announced aggressive measures to ease monetary policy, including a plan to double its holdings of bonds and stocks in two years.
"Further easing from the BOJ should ultimately be positive for gold, but for now seems unable to match the combination of poor sentiment and a firmer dollar," UBS said in a note.
EUROPEAN SHARES STEADY
On the wider markets, European shares pared gains after the ECB left rates on hold. Markets particpants will monitor Friday's release of U.S. payrolls data for March, which will give the clearest assessment of the U.S. jobs market.
Signs of economic improvement could prompt the U.S. Federal Reserve to halt its bullion-friendly bond-buying programme earlier than expected.
There was further liquidation of gold-backed ETFs on Wednesday, with holdings of the largest, New York's SPDR Gold fund declining another 2.71 tonnes after the previous session's 8.1-tonne outflow.
Physical demand was stronger in Asia after the metal fell and as North Korea moved what appears to be a mid-range missile to its east coast, according to South Korea's Yonhap news agency.
Tokyo gold futures declined as much as 2.1 percent before paring some losses as the weaker prices ignited buying from speculators in Japan. Premiums for gold bars in Tokyo edged up to 50 cents an ounce to spot London prices from zero earlier this week.
Those precious metals more widely used in industry came under pressure, also due to weak economic data in the United States overnight.
Silver tumbled to its lowest level since July 24 at $26.65 an ounce and was later at $26.82, down 0.3 percent.
Platinum dropped to its lowest since late August at $1,504.50. It was later at $1,521.49, down 0.7 percent, while palladium was down 1.8 percent at $736.50. (Editing by Helen Massy-Beresford and Keiron Henderson)