PRECIOUS-Gold up on ECB rate cut talk, non-farm payrolls eyed

* U.S. open interest at three-month low

* Gold priced in euros rises but near oversold territory

* ETF at record, Indian physical bullion demand strong

* Coming up: U.S. November non-farm payrolls Friday

(Adds market details, updates prices)

By Frank Tang

NEW YORK, Dec 6 (Reuters) - Gold rose on Thursday on

short-covering before a U.S. employment report and after

comments from the European Central Bank chief boosted

expectations of an interest rate cut.

Bullion buying took off after ECB President Mario Draghi

said the euro zone economy was likely to shrink next year as it

has in 2012, and downside risks to growth prevailed for the

region battered by a prolonged debt crisis.

The metal rebounded from the previous session's one-month

low but gains faced resistance from technical selling around its

100-day moving average near $1,700 an ounce. Sharp losses in

euro and crude futures also limited gold's gains.

Funds have been liquidating of late as open interest in U.S.

gold futures, a gauge of market activity, fell to a three-month

low.

"The loss of all of this open interest signals the

institutions are moving to the sidelines until after an

announcement on the 'fiscal cliff'," said George Gero, vice

president of RBC Capital Markets, referring to talks aimed at

resolving a potential U.S. budget crisis at the year-end.

Spot gold was up 0.3 percent at $1,699.05 an ounce by

3:34 p.m. (2034 GMT).

U.S. COMEX gold futures for February delivery settled

up $8 an ounce at $1,701.80, with trading volume around 25

percent below its 30-day average, preliminary Reuters data

showed.

The metal also tracked gains in U.S. equities after data

showed the number of Americans filing new claims for

unemployment benefits last week fell back to the range before

superstorm Sandy.

"There is a preference for riskier assets and

interest-bearing assets," said Andrew Cole, fund manager with

Baring Asset Management.

Despite Thursday's gain, gold's 14-day relative strength

index (RSI) was at 39, near an area below 30 which analysts

consider oversold.

Gold priced in euros rose over 1 percent, its

biggest daily rise in a month, boosted by the euro's sharp drop

on Draghi's comments and the metal's gains.

PAYROLLS, BUDGET TALKS IN FOCUS

Gold investors are awaiting direction from U.S. non-farm

payrolls data for November on Friday and next week's Federal

Reserve policy meeting, as well as clearer signals on how the

United States will deal with negotiations aimed at preventing

$600 billion of tax increases and federal spending cuts.

The metal has been under pressure due to uncertainty over

the budgetary measures, which could push the world's biggest

economy back into recession.

Investors' appetite for physical gold and physically backed

investment products remained sharp, with holdings of the largest

gold exchange-traded fund, SPDR Gold Trust, at a record

high.

Demand in India, one of the world's biggest buyers of gold,

was also firm as the rupee climbed.

Among other precious metals, silver was up 0.4

percent at $32.98 an ounce. Platinum rose 1.1 percent to

$1,593.49 an ounce, while palladium climbed 1.5 percent

to $692.50 an ounce.

3:34 PM EST LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL

US Gold FEB 1701.80 8.00 0.5 1687.10 1704.80 133,934

US Silver MAR 33.114 0.157 0.5 32.600 33.330 37,562

US Plat JAN 1600.70 16.50 1.0 1573.40 1601.90 7,830

US Pall MAR 697.05 9.60 1.4 683.00 700.80 4,655

Gold 1699.05 5.64 0.3 1686.73 1702.86

Silver 32.980 0.140 0.4 32.570 33.230

Platinum 1593.49 17.49 1.1 1576.50 1598.50

Palladium 692.50 10.00 1.5 684.50 696.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG

US Gold 138,947 186,372 174,754 13.42 0.34

US Silver 40,916 59,041 52,743 21.69 -1.12

US Platinum 8,724 8,402 8,792 16.45 0.12

US Palladium 4,657 6,061 4,747

(Additional reporting by Jan Harvey and David Brough in London;

Editing by Dale Hudson and Kenneth Barry)

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