PRECIOUS-Gold recovers after biggest weekly drop this year

* Downbeat U.S. payrolls data helps gold rebound
    * Chinese buyers return from Golden Week holiday
    * Palladium snaps 5-session losing streak
    * GRAPHIC-2016 asset returns:

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, Oct 10 (Reuters) - Gold recovered on Monday
from its biggest weekly drop since November after downbeat U.S.
payrolls data on Friday dampened speculation of a near-term
interest rate hike and as Chinese buyers returned after the
Golden Week holiday.
    The metal slid 4.5 percent last week, touching a four-month
low of $1,241.20 an ounce on Friday, after a break of support at
$1,300 unleashed a wave of technically-driven selling.
    Spot gold was up 0.2 percent at $1,259.48 an ounce by
2:30 p.m. EDT (1830 GMT), while U.S. gold futures for
December delivery settled up 0.7 percent at $1,260.40 per ounce.
    "Traders love to bag a bargain, even if it is a short term
trade," said Naeem Aslam, chief market analyst at ThinkMarkets.
    "The support at $1,233 is under a major focus and it could
be retested if the upcoming U.S. retail sales data due this week
prints a strong number, as this will fuel further speculation
that the Fed will increase the interest rate this year."
    Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
    "The pundits are still talking up a Federal Reserve hike for
December but it doesn't look that likely," said Miguel
Perez-Santalla, vice president of Heraeus Metal Management in
New York. 
    "The market is very quiet but at the same time it may be
that Chinese returning from their holidays saw the metal prices
as a bargain and began buying."    
    China, which celebrated the Golden Week holiday last week,
is the world's biggest consumer of physical gold.
    Meanwhile, the world's largest gold-backed exchange-traded
fund, New York-listed SPDR Gold Shares, reported the
biggest one-day rise in its holdings since early July on Friday,
of 11.3 tonnes. 
    Gains in gold were capped however by a perception that
Democrat Hillary Clinton had won out over Republican Donald
Trump in the second U.S. presidential debate overnight. A Trump
victory would have been seen as beneficial for gold, analysts
said, as it would increase uncertainty. 
    Among other precious metals, silver was up 0.7
percent at $17.63 an ounce. It fell 8.5 percent last week, its
biggest weekly drop in more than three years.
    Platinum was down 0.2 percent at $962.40, having
touched $946.40 on Friday, its lowest since April 7. Palladium
 snapped a five session fall, and was 0.3 percent higher
at $666.90.

 (Additional reporting by Swati Verma and Vijaykumar Vedala in
Bengaluru; Editing by Keith Weir and Tom Brown)