Gold bounced from a 5-week low on Friday as weaker prices ignited buying by bargain hunters and jewelers across Asia, but investors were cautious ahead of a U.S. employment report.

nvestors shrugged off a small drop in ETF holdings, turning their attention to the June non-farm payrolls data that will set the tone for currencies and equities. Gold tumbled nearly 4 percent on Thursday, the biggest one-day fall in five months, as funds sold bullion to cover losses in other markets.

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Spot gold hit a low of $1,196.00, its weakest since May 25, before rebounding to $1,207.35 per ounce by 0608 GMT, up $8.70 from New York's notional close as the Nikkei edged up and the euro gained. Gold struck a record $1,264 last week.

"Unless we start to see the ETF holdings reduced markedly, then I would expect we'll have a bit of a rebound in the next few days," said Darren Heathcote, head of trading at Investec Australia in Sydney.

"If it starts to show significant falls, then it shows investment demand is actually starting to wane and we might be a little bit more concerned about further weakness, but at the moment I would say No."

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings dropped to 1,319.219 tonnes by July 1 from a record of 1,320.436 tonnes on June 29 -- the first decline since early June.

U.S. gold futures for August delivery added $1 to $1,207.7 an ounce.

Purchases from retail investors pushed up premiums for gold bars in Tokyo to $1 an ounce to the spot London prices from zero earlier this week. That was the highest level since July last year.

"We've have seen some buying interest in gold and silver from various sectors including the general public. Premiums rise to $1 because of strong buying interest," said a physical dealer in Tokyo.

Dealers in Singapore noted bargain hunting as well as a surge in physical demand from Thailand, keeping premiums steady at 40 to 60 U.S. cents

Light buying from jewelers stirred up physical trading in Hong Kong, where premiums were also steady at 50 cents, but there was a lack of interest from investors.

"I think gold will fall if the job data is bad. It will be the same story," said a dealer in Hong Kong, referring to a possible decline in bullion as investors cover losses.

"I think people are reluctant to commit too much at the high level. We really have to see if there will be more physical buyers and jewelers at these levels."

Japan's Nikkei ended higher ahead of the U.S. job data but worries about a double-dip recession lingered as investors moved away from the euro-zone debt concerns to U.S. data pointing to a slowing recovery. .T .N

The labor department releases its June employment report at 1230 GMT. Economists are forecasting a loss of 110,000 jobs in June compared with an increase of 431,00 jobs in May.

The dollar was on the back foot against the euro and slipped against the Aussie on Friday after a big euro short squeeze ahead of the jobs data, while the yen lost ground all round as the squeeze spilled into Asian trade.

From: Reuters