* Euro slides to four-month low vs dollar on Italy, Cyprus worries
* Gold in euros hits two-month highs
* Spot silver drops to 3-week low on technical selling (Updates prices)
By Clara Denina
LONDON, March 27 (Reuters) - 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 0.3 percent to $1,602.96 an ounce by 1529 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 1 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. In euro terms, gold peaked to its highest since January 24 at 1,260.06.
"Gold moved above $1,600 as there is a lot of uncertainty in Europe due to the 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.
"But the gold market is still vulnerable to losses in the short term 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 Italian manufacturing and retail sales and a confirmation that France's economy contracted at the end of last year.
Stock markets in Europe and the United States 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.
For now, the country has imposed a ban on cashing checks and limit the amount of cash that can be taken abroad.
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.
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 $28.52, down 0.7 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 0.2 percent to $1,571.99. Spot palladium inched down 0.1 percent to $761.47.
"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 Alison Birrane)