By Amanda Cooper LONDON, March 20 (Reuters) - Gold fell for the first time in four days on Tuesday, hampered by the strength in the dollar, which profited from the growing view in the market that the U.S. economy is on a firmer footing. The dollar benefited from wariness in the market stemming from talks between Italy's government and unions on the reforms needed to turn around the euro zone's third-largest economy, which kept the euro under pressure and dented equities. Data from the United States in the last couple of weeks has suggested the economy is recovering more quickly than anticipated, lessening the need for the Federal Reserve to buy government bonds to anchor interest rates and support growth. Adding to the negative mood in gold was a sharp rise in benchmark 10-year U.S. Treasury yields, which have gained more than a third of a percentage point in less than a week, while holdings of the metals in exchange-traded products staged their largest one-day drop since late January. Spot gold was down 0.6 percent on the day at $1,650.55 an ounce by 1455 GMT, having slid by nearly 3 percent so far this month. 'Gold is looking for support and buyers and so far probably has not found either,' Ole Hansen, senior manager at Saxo Bank, said. 'It's very much intraday movements related to the ups and downs of the dollar, which is setting the agenda for the time being.' 'We are going to see a bumpy ride over the coming weeks but I think investors eventually will step up to the plate. Rising bond yields are not going to be looked upon lightly by the Fed and some kind of action (from the central bank) could be the result, which will support gold,' he said. Gold's correlation with Treasuries has reversed in the last week, meaning the bullion price is more likely to move in tandem with Treasury prices than against them. YIELD APPEAL A rise in yields increases the appeal of the U.S. dollar for foreign investors, which in turn delivers a double blow to gold, which tends to fall when the dollar strengthens as non-U.S. investors sell their bullion holdings to take greater profit on their position in their local currency and secondly increases the so-called 'opportunity cost' of owning the metal. When interest rates are low, investors forfeit less of a premium for holding gold, which bears no yield or dividend, rather than stocks or bonds. An environment of rising rates increases this opportunity cost. Holdings of gold in the world's major ETPs saw their largest one-day outflow in two months on Tuesday, falling by over 56,000 ounces to 70.843 million ounces, reflecting some of the desire among investors to hold assets that profit strongly from an upswing in the business cycle, such as equities. A strike by the jewellery industry in India, the world's largest gold consumer, in protest against a government plan to raise the import duty on bullion, has cut physical demand noticeably this week. Anne-Laure Tremblay, an analyst at BNP Paribas, said while there were some headwinds for gold in the short-term, she was maintaining her price forecast for this year at $1,850.00/oz. 'Beyond the short term, we remain positive on gold's outlook as the fundamentals are still solid. These include high liquidity, low interest rates and sovereign debt concerns,' she said. In other precious metals, silver fell by 2.3 percent to $32.43 an ounce, while U.S. May silver futures were down 1.5 percent at $32.45. Platinum fell 1.0 percent to $1,657.49 an ounce while palladium fell 0.6 percent to $697.72 an ounce.

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