By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold held on to sharp overnight gains on Friday, on track for its first weekly rise in three weeks, as the European Central Bank launched a series of measures to pump money into the sluggish euro zone economy.
Investors, however, refrained from taking big positions as they were eyeing U.S. nonfarm payrolls report later in the day for indications on the health of the world's biggest economy.
Spot gold was steady at $1,254.00 an ounce by 0319 GMT, after jumping nearly 1 percent on Thursday - its biggest daily percentage rise since the middle of last month.
The metal fell to a four-month low on Tuesday, but is now headed for a 0.2 percent gain for the week.
"The rally is a reaction to the increased liquidity environment that ECB announced," said Barnabas Gan, an analyst at OCBC Bank, adding that gold will ultimately react to movements in the dollar, and U.S. economic data that will determine the Federal Reserve's policy moves.
The ECB outlined a four-year 400 billion euro ($544.86 billion) scheme giving banks that have been holding back credit an incentive to increase lending to businesses in the euro zone, and pledged to do more if needed to fight off the risk of Japan-like deflation.
The bank also noted that euro zone inflation has been stuck in "the danger zone" below 1 percent since October.
Gold is often seen as a hedge against inflation and a slowing economy. The greenback-denominated metal has an inverse relation with the dollar and equities.
Data on Friday is likely to show that U.S. job growth slowed in May and the unemployment rate probably ticked up, but not by enough to upset the view that the economy is bouncing back strongly after a winter slump.
"If that data surprises on the upside, gold should take a dip below $1,250 again," said OCBC's Gan.
Among other precious metals, platinum and palladium added to gains after South Africa's AMCU union president said the union's 12,500 rand ($1,200) per month wage demand was "non-negotiable", dashing hopes of a speedy resolution to a five-month stoppage.
South Africa is the biggest producer of platinum and second biggest producer of palladium.
(Editing by Himani Sarkar)
