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* Gold prices head for second weekly loss
* China closed for holidays, Indian demand soft
* GRAPHIC-Asset returns: link.reuters.com/dub25t (Adds comment, byline, NEW YORK dateline; updates prices)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Sept 4 (Reuters) - Gold prices fell towards a second weekly loss on Friday after U.S. payrolls data failed to allay uncertainty over the prospect of a near-term interest rate hike from the Federal Reserve.
Data from the Labor Department on Friday showed that non-farm payrolls rose 173,000 last month, a slowdown from July's upwardly revised gain of 245,000.
However, a drop in the unemployment rate to a near 7-1/2-year low and an acceleration in wages kept alive prospects of a Federal Reserve interest rate increase later this month.
Spot gold was down 0.4 percent at $1,120.80 an ounce at 2:49 p.m. EDT (1849 GMT), while U.S. gold futures for December delivery settled down 0.3 percent at $1,121.40. The metal is on track to fall for a second week.
"Overall I think the payrolls were erring on the better side, even though the headline number was weaker, because of the lower unemployment rate, the higher hourly earnings, and the upward revisions," ABN Amro analyst Georgette Boele said.
A top Federal Reserve policymaker said the data on the U.S. jobs market was "good" and did not change the outlook for monetary policy.
Global equity markets tumbled and the dollar was mixed after the data.
Gold has come under pressure this year from expectations the Fed will hike rates for the first time in nearly a decade.
The Fed has already indicated that the timing of a hike is largely data-dependent.
The absence of Chinese buyers also weighed on gold, with markets in the major bullion consumer closed for public holidays. Monday will be a U.S. holiday.
Gold prices in India swung to a discount to the global benchmark this week for the first time since mid-July.
"Although August bullion imports were high, demand in India appears to have stalled," HSBC said in a note.
Capital Economics noted that weddings and festivals are viewed as auspicious times to buy gold in India.
"According to the Hindu calendar, the number of days ... considered propitious to get married is 30 percent lower in 2015 than in 2014," it said.
"Gold demand should recover in Q3 ahead of the big wedding and festival season in Q4."
In Australia, gold coin and minted bar sales at the Perth Mint dipped in August.
Among other precious metals, silver was down 1.8 percent at $14.51 an ounce. Platinum was down 1.3 percent at $987.74 an ounce, while palladium gained 0.8 percent at $577.50 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Evans, Pravin Char and Andrew Hay)