By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold added to sharp overnight gains on Thursday, as investors looked to square positions before the release of U.S. nonfarm payrolls data that could provide clues about the state of the economy and the outlook for the Federal Reserve's stimulus.
Friday's jobs report will follow a string of recent positive data that has showed the U.S. economy is recovering from severe winter weather conditions.
Spot gold rose 0.1 percent to $1,290.91 an ounce by 0339 GMT, after gaining 0.8 percent on Wednesday, the metal's biggest one-day jump in nearly three weeks.
Earlier in the week, the precious metal had fallen to a seven-week low.
"This is not a very inspired rally. A lot of people who are holding short positions are trying to square up before nonfarm payrolls," said a precious metals trader in Hong Kong.
"Some of the key physical markets in Asia are really silent these days, which is not a very positive factor for gold. And as the stock markets make fresh highs, it becomes tougher and tougher for gold to compete."
Gold, often seen as a safe investment in times of uncertainty, tends to be hurt by strong equities.
On Thursday, gold prices gained despite Asian shares trading at four-week highs and the recent upbeat U.S. data. The Japanese yen - another safe-haven investment - was near a 10-week low.
PHYSICAL MARKETS
Traders had hoped physical demand would climb with gold prices at a seven-week low earlier in the week, but the recent rally could discourage buyers.
Chinese gold prices briefly rose to a premium on Wednesday before settling on par with London prices, and they have fallen back to a discount of about $2 an ounce on Thursday.
Chinese gold has been trading at discounts to London prices since early March.
Physical demand across other major markets such as India, Thailand and Indonesia was also weak, dealers said.
(Reporting by A. Ananthalakshmi; Editing by Ed Davies)
