* China eases policy on concerns Sino-U.S. spat could hurt growth
* Speculators cut net short position in COMEX gold in Oct 2 week
* SPDR Gold holdings down 4.5 million ounces from April (Recasts, adds quote, updates prices)
By Sumita Layek
BENGALURU, Oct 8 (Reuters) - Gold fell alongside equity markets on Monday partly in response to gains in the dollar which is benefiting from a run of strong U.S. economic data reinforcing expectations of further interest rate rises.
Spot gold was down 0.7 percent at $1,193.81 an ounce at 1007 GMT. U.S. gold futures fell 0.7 percent to $1,197.80 an ounce.
Global equity markets tumbled as investor confidence took a knock from last week's spike in U.S. Treasury yields and concerns about an escalating trade war between the United States and China's growth.
The nervous mood was aggravated by China's central bank on Sunday cutting the level of cash that banks must hold as reserves, aimed at lowering financing costs.
"Weakness in emerging markets might bring in small bids for gold," said Nicholas Cawley, an analyst at DailyFX.com, adding that the "overriding factor is higher U.S. interest rates and bond yields."
"(Gold) trading below all major moving averages. The weaker yuan and higher dollar index are both negative for the metal and the path for gold looks lower."
A stronger dollar makes dollar-denominated gold more expensive for holders of other currencies.
Gold has fallen more than 12 percent from a peak in April largely due to the dollar's strength, which reflects a vibrant U.S. economy, rising U.S. interest rates and fears of a global trade war.
But gold has held in a $34 range for the last 1-1/2 months, which some analysts say suggests a resilience due to safe haven bids spurred by worries over the damage to emerging market economies from higher U.S. interest rates.
U.S. unemployment rate fell to near a 49-year low, as per a government report on Friday, which also showed a steady rise in wages, suggesting moderate inflation pressures, that could keep the Federal Reserve on a path of gradual interest rate increases.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
"Bullion remains in the lateral trading range of the last few weeks between $1,180 and 1,210, without a clear direction," said Carlo Alberto De Casa, chief analyst at ActivTrades.
Meanwhile, speculators cut their net short position in COMEX gold by 4,186 contracts to 73,128 in week to Oct. 2.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.2 percent to 730.17 tonnes, on Friday. Holdings have fallen 4.5 million ounces from a peak in April
Spot silver fell 1 percent to $14.43 and palladium declined 0.2 percent to $1,066.60. Platinum was down 0.3 percent at $818.90 an ounce. (Reporting by Nallur Sethuraman in Bengaluru. Editing by Jane Merriman)