PRECIOUS-Gold set for worst loss in 5 months on Fed stimulus concerns
* Spot gold headed for 6 pct monthly drop
* Thin trading, physical buying keep prices in range
* China demand picks up this week, volumes increase
(Updates throughout, changes dateline from SINGAPORE)
LONDON, Nov 29 (Reuters) - Gold edged up on Friday as the dollar fell, but was still headed for its biggest monthly drop in five months on signs that recovery in the U.S. economy could lead to easy central bank money drying up.
Gold has shed six percent in November and has lost more than a quarter of its value so far this year, which puts it on track to post its first annual loss in 13 years.
It has stayed below $1,300 for the past three weeks and has been largely rangebound in the last few sessions due to thin trading around the U.S. Thanksgiving holiday on Thursday.
Spot gold rose 0.2 percent to $1,245.70 an ounce by 1045 GMT. It fell to a 4-1/2 month low of $1,227.34 on Monday.
U.S. gold futures rose 0.6 percent to $1,245.50 an ounce.
Traders see the next resistance levels at $1,255 and $1,290, while support stands in the $1,220 area.
The dollar fell 0.2 percent against a basket of currencies, while European shares inched up.
"The labour market report next week could be crucial because if it is strong the market would fear again that the Fed would taper in December," Quantitative Commodity Research owner Peter Fertig said.
"That is clearly the focus and will keep gold rather rangebound ... gold will continue to react to the U.S. data as this always leads to discussion about tapering."
Monthly bond purchases worth $85 billion by the U.S. Federal Reserve have burnished gold's appeal as an inflation hedge.
The next major data release, U.S. non-farm payroll figures, is scheduled for Dec. 6. The Fed's next policy meeting will be held Dec. 17-18.
Buying from China, set to become the world's biggest consumer of gold this year, picked up this week.
On Thursday, traded volumes of 99.99 percent purity gold on the Shanghai Gold Exchange hit their highest in seven weeks.
Volumes for the week at the Friday close were the highest since the last week of September.
ANZ cut its precious metal price forecasts for 2014 and it expects gold to average $1,269 per ounce, compared to $1,436 previously, citing softer-than-expected demand and negative market sentiment.
Silver rose 0.9 percent to $19.83 an ounce. The metal was headed for a 9.2 percent monthly fall, the worst since June.
Spot platinum gained 0.4 percent to $1,360.50 an ounce and spot palladium rose 0.3 percent to $718.20 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Andrew Roche)