SINGAPORE, Nov 6 (Reuters) - Gold languished near an eight-week low on Friday and was set to post its worst weekly drop in eight months as investors positioned themselves for a possible U.S. rate hike this year, pulling money out of bullion funds.
Focus will be on the U.S. nonfarm payrolls report due later in the day as markets look to gauge the strength of the economy and how it would affect the Federal Reserve's monetary policy.
FUNDAMENTALS
* Spot gold XAU= had ticked up 0.2 percent to $1,106.05 an ounce by 0033 GMT, but was close to $1,102.35 hit in the previous session, the lowest since Sept. 11.
* The metal has lost 3.2 percent for the week, the sharpest slide since the week ended March 6.
* Fed Chair Janet Yellen said on Wednesday that a rise in rates in December was a "live possibility" if justified by upcoming economic data. William Dudley, president of the New York Fed, later on Wednesday agreed with her comments. urn:newsml:reuters.com:*:nL1N12Z20G
* After the U.S. central bank's September meeting, investors believed the Fed would delay the first U.S. rate hike in nearly a decade to next year on global growth concerns. But in October, the Fed made a direct reference to its next policy meeting in December as a possibility for a rate increase.
* The Fed in its last policy statement was deliberately trying to convince investors of a possible December interest rate hike, and was successful in doing so, Atlanta Fed President Dennis Lockhart said on Thursday. urn:newsml:reuters.com:*:nL1N1302RU
* Gold as a non-interest-paying asset could see demand take a hit from higher rates.
* Assets in SPDR Gold Trust GLD , the top gold-backed exchange-traded fund, tumbled to 671.77 tonnes on Thursday, the lowest since mid-August.
* On Thursday alone, the fund saw outflows of 8.34 tonnes, the biggest daily drop since July 17.
* Solid payrolls data later in the session could seal the case for a December rate hike. According to a survey of economists, nonfarm payrolls probably increased 180,000, well above the 139,000 jobs per month average for August and September.
* Silver XAG= and platinum XPT= were headed for their third straight weekly declines. With a 10-percent slide, palladium XPD= was on track for its worst week since September 2011.
* For the top stories on metals and other news, click TOP/MTL or GOL
MARKET NEWS
* The dollar held firm on Friday with investors on tenterhooks to see whether the upcoming U.S. job data will be strong enough to cement rising expectations of a Fed interest rate hike next month. USD/
DATA AHEAD (GMT)
0700 Germany Industrial output Sep
0745 France Trade data Sep
1330 U.S. Nonfarm payrolls Oct
1330 U.S. Unemployment rate Oct
2000 U.S. Consumer credit Sep
PRICES AT 0033 GMT Metal
Last
Change Pct chg
Spot gold
1106.05
2.5
0.23 Spot silver
14.98
0.02
0.13 Spot platinum
949.5
3.51
0.37 Spot palladium
605.25
1.5
0.25 Comex gold
1105.7
1.5
0.14 Comex silver
14.975 -0.008
-0.05
COMEX gold and silver contracts show the most active months