Gold prices dip ahead of U.S. non-farm payrolls data

BENGALURU (Reuters) - Gold prices inched down early on Friday to hover around their lowest in nearly two months, with investors waiting for key U.S. non-farm payrolls data later in the day.

FUNDAMENTALS

* Spot gold had fallen 0.2 percent to $1,222.65 per ounce by 0104 GMT. It has dropped 1.5 percent this week and could be heading for its biggest weekly decline since early May.

* U.S. gold futures for August delivery declined 0.1 percent to $1,222.40 per ounce.

* The dollar was steady in early Asian trade on Friday, on track for weekly gains but likely to tread water throughout the day as investors braced for the monthly U.S. employment numbers.

* U.S. private employers hired fewer workers than expected in June and applications for unemployment benefits last week increased for a third straight week, pointing to some loss of momentum in job growth as the labour market nears full employment.

* U.S. Treasury yields rose on Thursday, with benchmark yields touching nearly eight-week highs, on the prospect of hawkish global central bank policy and concern that rising oil prices could spur inflationary pressures.

* U.S. President Donald Trump vowed on Thursday to confront North Korea "very strongly" following its latest missile test and urged nations to show Pyongyang there would be consequences for its weapons programme.

* Trump and Russian President Vladimir Putin are set to size each other up in person for the first time on Friday in what promises to be the most highly anticipated meeting on the sidelines of the G20 summit.

* European Central Bank policymakers are open to a further step towards reducing their monetary stimulus but are likely to move slowly out of fear of causing market turmoil, minutes of their last meeting showed on Thursday.

* China's central bank said on Thursday that it would strengthen the ability to adjust interest rates and improve efficiency of its medium-term lending facility (MLF), standing lending facility (SLF) and reverse repos operations.

* An increase in taxes on gold sales in India could curb short-term demand from the world's No. 2 consumer of the metal, the World Gold Council (WGC) said.

* Gold demand in India lost steam this week as consumers held off after stepping up purchases ahead of a new tax policy effective this month, while fresh buying in China also remained sluggish despite a slide in global spot prices.

(Reporting by Nithin Prasad in Bengaluru; Editing by Joseph Radford)