Gold poised for third weekly drop; US jobs data in focus

SINGAPORE (Reuters) - Gold held close to a 4-1/2 year low and looked set to post its third straight weekly drop on Friday, as the U.S. dollar rallied on expectations the Federal Reserve could raise rates sooner rather than later.

A robust U.S. nonfarm payrolls report later in the day could provide more evidence of a strengthening economy, influencing the Fed and possibly hurting gold, a non-interest-bearing asset.

FUNDAMENTALS

Spot gold was little changed at $1,140.60 an ounce by 0040 GMT, close to the $1,137.40 level reached earlier this week that was its lowest since April 2010. The metal has fallen nearly 3 percent this week.

The sell-off in gold began last Friday, when the metal broke through $1,180 - the low it touched during last year's 28-percent plunge. Since then, strength in the dollar and breaks below key technical levels have dragged on gold.

The U.S. jobs report later today is seen as a key trigger for the dollar and gold, which could potentially send bullion hurtling towards $1,000.

The dollar, trading close to a four-year high against a basket of major currencies, is on track to post its third straight weekly gain. A steadily recovering U.S. economy has boosted the greenback, along with weakness in the euro and the yen.

Other than the dollar strength, analysts were concerned about the lack of robust demand in China. The top consumer of the metal typically buys a lot of jewellery, bars and coins whenever prices fall, providing a floor to down markets, but that hasn't happened this time around.

In a reflection of market sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.41 percent to 732.83 tonnes on Thursday - a new six-year low.

Among other precious metals, silver was stuck near a Feb. 2010 low of $15.13 and was eyeing a fourth weekly decline in a row.

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