Gold firm near $1,200, eyes third weekly gain

SINGAPORE (Reuters) - Gold was headed for a third weekly gain in a row on Friday buoyed by a pause in the dollar rally and short-covering after sharp losses, with support also from physical demand that is picking up on firmer prices.

FUNDAMENTALS

* Spot gold was little changed at $1,193.06 an ounce by 0042 GMT, after gaining nearly 1 percent in the previous session. The metal is so far up 0.4 percent for the week.

* The U.S. dollar paused for breath on Friday as its recent rapid ascent on the yen attracted profit taking, though the market mood remains bullish on the currency given the outperformance of the U.S. economy.

* Gold had fallen to a 4-1/2-year low of $1,131.85 earlier this month on a strong dollar.

* Investors focused on U.S. Labour Department data on Thursday which showed underlying inflation pressures rose in October, even though that also bolstered expectations of a mid-2015 interest rate hike from the Federal Reserve.

* Bullion is seen as a hedge against inflation, though an increase in rates could dull its appeal. Gold is a non-interest-bearing asset.

* Ukraine slashed its gold reserves by more than a third in October, while Russia increased its reserves for a sixth straight month, according to International Monetary Fund data released on Thursday.

* Significant buying and selling by central banks can influence gold prices, which earlier this month

* Switzerland's gold exports rose by more than 12 percent in October as shipments to major consumers India and China surged, data from the Swiss customs bureau showed on Thursday.

* Some of the biggest price moves in gold since late October have, unusually, occurred in Asian hours and traders more accustomed to following the lead of their Western counterparts suspect a big increase in algorithmic trading may be to blame.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)