* U.S. Fed minutes in focus
* European shares hit by weakness in auto sector
* Nervous investors using dips to cover short postions-analyst
(Recasts, updates prices and quotes)By Sumita LayekBENGALURU, Oct 17 (Reuters) - Gold rose on Wednesday as arally in global equities ran out of steam, denting the appeal ofriskier assets, while bullion investors used recent price dipsto cover short positions.Spot gold was up 0.4 percent at $1,229.08 an ounce at0223 GMT, not far from the two-and-a-half-month peak of$1,233.26 hit on Monday as a rout in stock markets forcedinvestors to seek safety in the metal.U.S. gold futures rose 0.3 percent to $1,232."Gold is being supported by any signs of stock marketweakness and also nervous shorts, who are trying to pull out,"said Saxo Bank analyst Ole Hansen."The market was surprised by the extended short positionsand the spike indicated a lot of traders were wrong-footed. Italso indicates that the dips are being used to cover the shortpositions."A recovery by global stocks proved short-lived as warningsover a slowing European auto sector soured an upbeat mood, whileWall Street was set for a slightly lower open after its bestsession in eight months the previous day. "Gold is moving technically and is giving a very good signalafter it rebounded from $1,220 levels," said ActivTrades chiefanalyst Carlo Alberto De Casa."We are now approaching another key resistance area around$1,230."Bullion was also testing resistance at the 100-day movingaverage of about $1,226. A convincing break above that is seenas a bullish sign for investors who follow technical signals.Investors have now turned their attention to the release ofminutes from the U.S. Federal Reserve's September policy meetingat 1800 GMT for fresh clues on the pace of monetary tightening.The Fed raised interest rates last month for the third timethis year and said it planned four more increases by the end of2019 and another in 2020."Moving forward, with growing concerns about the globaleconomy on the back of trade tensions, there is potential for abit of an upside in gold," said ING analyst Warren Patterson.Holdings of SPDR Gold Trust , the largest gold-backedexchange-traded fund, have risen about 2.5 percent in the pasteight days, which analysts said shows a shift in perception insentiment among gold ETF investors.
Meanwhile, some central banks have taken their holdings ofgold to record levels in recent months in an effort to maintainthe value of their currencies against a rising U.S. dollar.In other metals, silver was up 0.5 percent at $14.72an ounce, platinum rose 0.1 percent to $838.20 andpalladium was flat at $1,079. (Reporting by Sumita Layek and Nallur Sethuraman in Bengaluru;Editing by Elaine Hardcastle and David Goodman)
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