(Corrects to adds dropped word "percent" in third bullet point)
Oct 10 (Reuters) - Gold rose early Monday, after marking a four-month low in the prior session, supported by an easing dollar, with markets eyeing the second U.S. presidential debate between candidates Hillary Clinton and Donald Trump.
FUNDAMENTALS
* Spot gold XAU= was up 0.6 percent at $1,263.80 an ounce by 0110 GMT. The yellow metal touched a session low of $1,241.20 on Friday, a bottom since June 7.
* U.S. gold futures GCcv1 rose over one percent to $1,266.10 an ounce.
* Spot gold ended about 4.5 percent lower last week, its biggest weekly decline since November 2015.
* The dollar index .DXY , which measures the greenback against a basket of six major currencies, fell 0.2 percent to 96.458. USD/
* The controversy over Republican candidate Donald Trump's vulgar comments about women has increased U.S. financial markets' expectations that his Democratic rival Hillary Clinton will win the White House and give a boost to securities. Trump on Sunday struck a defiant tone in the face of calls for him to abandon the U.S. presidential race, attacking prominent Republicans and saying he had "tremendous support". Clinton and Trump will square off from 0100 GMT in their second of three debates before the U.S. presidential election on Nov. 8.
* U.S. employment growth eased for the third straight month in September and the jobless rate rose, but the slowdown was not expected to prevent the Federal Reserve from raising interest rates later this year. The U.S. economy's readiness - or not - for an interest rate rise is likely to once again take the global economic spotlight this week, just a month before a hotly contested U.S. presidential election. Holdings of the SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, rose 1.19 percent to 958.90 tonnes on Friday. GOL/ETF
* Hedge funds and money managers reduced 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. Randgold Resources RRS.L said on Sunday that it is seeking to resolve a tax dispute with the Malian government, adding that the disagreement has not affected operations at its three mines in the West African country. Demand for gold in Asia edged up this week as prices hovered near their lowest since early June, while discounts in India narrowed the most in 8-1/2 months as a fall in prices prompted buying during the festive season. GOL/AS
* Bank of America Merrill Lynch (NYSE:BAC) lowered its gold price forecast to $1,301 per ounce from $1,323 per ounce for 2016. For the top stories on metals and other news, click TOP/MTL or GOL
DATA/EVENT AHEAD (GMT)
0600 Germany
Trade data
August
0830 Euro zone
Sentix index
October
1400 U.S.
Employment trends
September