(Updates prices)
* U.S. non-farm payrolls data expected at 1330 GMT
* Palladium drifts away from all-time highs
* Platinum set for fifth straight weekly decline
By Swati Verma
BENGALURU, Dec 7 (Reuters) - Gold prices on Friday traded near a five-month high hit the previous session on expectations of a slowdown in U.S. rate hikes next year, pushing bullion towards its biggest weekly gain since August.
Investors are focused on U.S. non-farm payrolls data later in the day for clues on the future path of rate hikes by the U.S. Federal Reserve.
Spot gold XAU= was up 0.2 percent at $1,239.97 per ounce at 1257 GMT, having hit $1,244.32 per ounce in the previous session, its highest since July 17.
With a rise of nearly 1.5 percent this week, gold looked set to clock its best gain since the week of Aug. 24.
U.S. gold futures GCcv1 were also 0.2 percent higher at $1,246.10 per ounce.
"The reaction is rather muted, given the massive support from many sides, i.e. slumping stock markets, falling bond yields, falling Fed rate hike expectations," said Commerzbank (DE:CBKG) analyst Carsten Fritsch.
"Much will depend on the U.S. jobs report today and how it will impact Fed rate hike expectations which have been scaled back so dramatically that a strong report could lead to a readjustment, putting gold under pressure," he said.
Interest rate futures IRPR suggested traders see less than one rate increase from the Fed next year, compared with previous expectations for possibly two rate hikes.
"If gold was ever going to stage a meaningful rally, it would be now. We are indeed in a risk-off environment with stocks and yields having fallen sharply, while the dollar hasn't been doing too great either," said Fawad Razaqzada, an analyst with Forex.com.
"While some speculators are waiting to get onboard after the U.S. jobs report is out of the way, some of the more technically-minded traders are probably waiting for that $1,240 resistance level to give way," he said.
Gold, which is considered a safe investment during times of financial, economic and geopolitical uncertainty, has recovered about 7 percent from 19-month lows hit in mid-August.
"With increased volatility and geopolitical risk, macro asset allocation is becoming more gold-positive again while we believe much of the dollar's upward move is now behind us with rate hike expectations dropping," analysts at BMO Capital Markets said in a note.
Meanwhile, spot palladium XPD= drifted further away from an all-time high of $1,263.56 hit this week.
The metal was down 1.3 percent at $1,193.97 per ounce, having fallen 2.7 percent in the previous session, but still set to post its second straight weekly gain.
Silver XAG= gained 0.1 percent to $14.49 per ounce and was headed for a weekly rise of about 2 percent.
Platinum XPT= was steady at $786.70, but extended losses for a fifth successive week.