* Downbeat U.S. payrolls data helps gold rebound
* Chinese buyers return from Golden Week holiday
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices)
By Jan Harvey
LONDON, Oct 10 (Reuters) - Gold rebounded on Monday from its biggest weekly drop since November after downbeat U.S. payrolls data on Friday dampened speculation of a near-term interest rate hike, and as Chinese buyers returned after the Golden Week holiday.
The metal slid 4.5 percent last week, touching a four-month low of $1,241.20 an ounce on Friday, after a break of support at $1,300 unleashed a wave of technically-driven selling.
It has since recovered as traders weigh up the timing of an U.S. interest rate hike this year after payrolls data on Friday came in softer than expected, bolstering expectations that hikes would only be gradual.
Spot gold XAU= was up 0.3 percent at $1,260.64 an ounce at 1210 GMT, while U.S. gold futures GCv1 for December delivery were up $10.70 an ounce at $1,262.60.
"Partly this is a reaction to the rather disappointing payrolls data on Friday, which has forced a readjustment of rate rise expectations," Mitsubishi analyst Jonathan Butler said. "There is also a feeling that the sell-off last week was rather overdone.
"Also of course we have a return of the Chinese physical market from a week-long holiday last week," he said. "The market was crucially lacking that element of physical support that we would normally expect to at least keep a floor under prices."
Hedge funds and money managers cut their net long positions in COMEX gold contracts to four-month lows in the week to Oct. 4, as prices tumbled, U.S. government data showed. the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares GLD , reported the biggest one-day rise in its holdings since early July on Friday, of 11.3 tonnes. GOL/ETF
Gains in gold were capped on Monday by a perception that Democrat Hillary Clinton had won out over Republican Donald Trump in the second U.S. presidential debate overnight. A Trump victory would have been seen as beneficial for gold, analysts said, as it would increase uncertainty. metal drifted lower throughout much of the debate, with many commentators affirming Clinton had taken the upper hand," MKS said in a note.
Financial markets saw less chance of a Trump victory amid a scandal over vulgar comments he made about women. other precious metals, silver XAG= was up 1.2 percent at $17.72 an ounce. It fell 8.5 percent last week, its biggest weekly drop in more than three years.
Platinum XPT= was 0.6 percent higher at $970.20 an ounce, having touched $946.40 on Friday, its lowest since April 7. Palladium XPD= snapped a five session fall, and was 0.6 percent higher at $668.90 an ounce.
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