* Gold higher a day after 2 pct drop
* Set for biggest weekly fall since Nov
* Still on track for best month in 1-1/2 years
* Data shows U.S. growth cooled in Q4 (Updates prices, adds comment)
By Jan Harvey
LONDON, Jan 30 (Reuters) - Gold firmed on Friday as investors weighed up the prospect of a U.S. interest rate rise later this year, with data showing economic growth cooled in the fourth quarter helping prices recover from the previous day’s 2 percent plunge.
Gold is still on track to post its biggest weekly fall in two months, however, on expectations that the Federal Reserve will hike rates this year for the first time in nearly a decade.
The metal had hit a five-month high hit earlier this month but concerns that its rally, above $1,300 an ounce, had gone too far prompted some investors to cash in gains on Thursday, knocking all the precious metals sharply lower.
Gold recovered some lost ground after the latest U.S. growth report, but struggled to make significant new headway.
“(The data) was soft, but many of the underlying components were strong, so it was not very bullish as far as gold is concerned,” INTL FCStone analyst Ed Meir said.
Spot gold was up 0.3 percent at $1,260.40 an ounce at 1457 GMT, while U.S. gold futures for February delivery were up $4.70 an ounce at $1,260.60.
Appetite for physical gold in Asia overnight remained muted despite lower prices.
Gold is up 6.5 percent so far this month helped by uncertainty over European stability, after the Swiss National Bank scrapped the franc’s peg to the single currency and the European Central Bank said it would pump billions into the economy.
“We’ve seen these sentiment-driven recoveries in the gold market a couple of times in the past two years, with the start of last year being one example, when it got support from the Ukraine crisis, before fading,” Julius Baer analyst Carsten Menke said. “We think this is very much comparable to what we saw last year.”
Recent weakness across precious metals is likely being driven by long liquidation, UBS said in a note on Friday, as participants look to square positions and book profits ahead of month-end.
“In terms of positioning, gold is most at risk after net longs jumped by as much 58 percent since the beginning of the year,” it said.
Silver was down 0.5 percent at $16.83 an ounce. Spot platinum was down 0.3 percent at $1,216.55 an ounce, while spot palladium was down 0.5 percent at $768.72 an ounce. (Additional reporting by Manolo Serapio Jr; editing by Jason Neely and Elaine Hardcastle)