By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold prices held steady on Friday, on track for their third straight weekly gain, as investors awaited clues from U.S. jobs data on whether the Federal Reserve could start to wind down its bullion-supporting monetary stimulus.
A weak reading on U.S. nonfarm payrolls, due later in the day, would likely prompt the Fed to continue its $85 billion monthly bond purchases to support the economy. That would help gold, typically seen as a hedge against inflation.
"Investors are expecting the Fed to come out and say that they will continue with the monetary easing because many believe that the nonfarm payroll will not be as good as expected," said Brian Lan, managing director of bullion dealer GoldSilver Central Pte Ltd in Singapore.
Spot gold was little changed at $1,412.81 an ounce by 0324 GMT, after climbing about 0.7 percent on Thursday as the dollar fell sharply against the yen and the euro.
U.S. job growth probably picked up only slightly in May, according to a Reuters survey of economists, suggesting the economy is still in a rut and not strong enough for the Fed to dial back its monetary support.
Data from Thursday showed that though new claims for unemployment benefits fell last week, the improvement in labour market conditions lacked vigour.
"The housing and labour markets are not very strong yet. The Fed has to keep in mind the impact on stock markets as well," Lan said.
Investors may have over reacted recently to the possibility of the Fed winding down its stimulus, a top U.S. central bank official said on Thursday.
U.S. bond and stock markets abruptly sold off on May 22 when Fed Chairman Ben Bernanke told a congressional committee that bond purchases could be reduced "in the next few meetings" of the Fed's policy committee if the economy continues to improve.
Gold is heading for a weekly gain of about 2 percent, after recovering from a loss early in the week on fears of slowing demand in India.
India is trying to curb gold imports to reduce its current account deficit. The world's biggest bullion consumer announced another hike in its import duty for gold, prompting a slow down in physical demand.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3 percent to 1,007.74 tonnes on Thursday, as outflows resumed after holding steady nearly a week. Holdings are at four-year lows.
(Reporting by A. Ananthalakshmi; Editing by Ed Davies and Tom Hogue)
