* Dollar heads for worst week since mid-August
* All eyes on outcome of Tuesday's U.S. election
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices)
By Jan Harvey
LONDON, Nov 4 (Reuters) - Gold steadied on Friday, heading for its biggest weekly rise since mid-September as jitters over next week's U.S. election offset a solid payrolls report that shored up expectations for a U.S. interest rate hike next month.
Global equity markets slipped amid investor concerns about the outcome of the U.S. presidential election on Nov. 8, while the dollar quickly shed gains made in the wake of the well-received U.S. jobs data. FRX/ MKTS/GLOB
An initial dip in gold was quickly bought into as investors remained on edge ahead of Tuesday's vote.
Spot gold XAU= was at $1,303.53 an ounce at 1512 GMT, off a low of $1,295.71 in the immediate wake of the payrolls data but little changed from $1,303.25 on Thursday. U.S. gold futures GCv1 for December delivery were up 0.1 percent at $1,304.60.
"The payrolls data is not (positive) enough to drive prices in a particular direction," ING's head of commodity strategy Hamza Khan said. "It's all going to be about the election on Tuesday. A Trump win would signal a positive direction for gold, so that's the bigger thing to watch."
The dollar index .DXY was on track for its biggest weekly drop since mid-August after the Federal Bureau of Investigation said last week it was reopening a probe into Democrat candidate Hillary Clinton's use of a private email server while Secretary of State.
The FBI announcement on Friday narrowed Clinton's lead over her Republican rival Donald Trump, polls showed, rattling financial markets which had been pricing in a Clinton victory. That helped send gold to a one-month high on Thursday, and has put it on track to rise 2 percent this week.
"Gold implied volatility rallied sharply across the curve over the past week, as investors rotated to safe haven assets after polls tightened," Citi said in a note. "As the election keeps driving gold prices in the short-term, we expect gold vol to remain elevated into Election Day."
Gold prices in India swung to a discount this week as a rally in prices dampened retail demand and prompted jewellers to reduce purchases, while buying in leading consumer China rose due to safe-haven buying. GOL/AS
Investor appetite looked firm, with the world's largest gold exchange-traded fund GLD announcing a 4.4-tonne rise in its holdings on Thursday. GOL/ETF
Silver XAG= was up 0.3 percent at $18.38 an ounce, on track to post its third consecutive weekly rise. Platinum XPT= was up 0.8 percent at $1,000.70 an ounce, while palladium XPD= was 1.8 percent higher at $626.97.
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http://reut.rs/1WAiOSC
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