* Analysts say $1,300 unlikely to be tested in short term
* Goldman sees limited gold upside, few Fed surprises (Updates prices, adds comment)
By Clara Denina
LONDON, May 11 (Reuters) - Gold rebounded from two-week lows on Wednesday as the dollar's rally paused and global shares fell, rekindling investors' appetite for the precious metal.
Spot gold XAU= rose 0.8 percent to $1,277.56 an ounce by 1447 GMT, while U.S. gold for June delivery GCcv1 gained 1 percent to $1,278.10 an ounce. The metal touched a low of $1,257.25 on Tuesday, its weakest since April 28.
"Gold has held technical support at $1,260, which is a positive sign, but we would have to wait for more U.S. economic data and the consequent impact on the dollar to see whether we can consistently exit the $1,220-$1,260 range," ActivTrades chief analyst Carlo Alberto de Casa said.
The dollar slipped 0.5 percent against a basket of major currencies .DXY , making dollar-priced assets such as gold cheaper for holders of other currencies. MKTS/GLOB
Gold reached a 15-month high of $1,303.60 last week, before surrendering to the general strength of the dollar.
Analysts see $1,300 as a tough barrier in the short term, as the metal has already risen 20 percent since the start of the year, bolstered by strong physical inflows and receding prospects in the near-term of an increase in U.S. interest rates.
"We do have a number of drivers that should give fundamental support for gold and are definitely capping the downside but gold has come along quite a bit this year so I can't see it breaching the $1,300 level more permanently when the dollar has increased so much," Danske Bank senior analyst Jens Pedersen said.
Gold is supported largely by expectations the next U.S. interest rate increase will only happen later in the year as Fed policymakers take note of challenging global economic conditions, Mark To, head of research at Wing Fung Financial Group said.
"The current situation is favourable to gold but it is not overwhelmingly favourable," he said, adding the U.S. economy appeared to be in good shape overall. "That's why people take some profits along the way."
Goldman Sachs (NYSE:GS) also sees "limited upside for gold pricing given the limited room for the Fed to surprise to the downside, limited room for the dollar to depreciate, and limited room for China to drive (emerging markets) currency strength to contribute to dollar weakness."
Goldman however increased its gold price forecasts for coming months, citing stronger net speculative positioning. precious metals also advanced, with spot silver XAG= gaining 2.3 percent to $17.48 an ounce, platinum XPT= up 2.2 percent at $1,069.39 and palladium XPD= rising 2.8 percent to $607.35.