* Dollar at five-month high versus yen
* Prices inch up after 2-day fall, erase gains from earlier rally
* SPDR holdings drop most in nearly two months on Thursday
LONDON, Dec 13 (Reuters) - Gold rose slightly on Friday after a sharp plunge the previous day attracted some buyers, but gains were limited by rising expectations of an early end to U.S. monetary stimulus after a slew of upbeat data.
Stronger-than-expected U.S. retail numbers data on Thursday, adding to last week's forecast-beating jobs report, have strengthened speculation the Federal Reserve could start winding down its bond purchases at its Dec. 17-18 meeting, although the market consensus is still for March.
"I don't think there'll be any substantial changes to the (Fed) policy or any big surprises," said Andrey Kryuchenkov, an analyst at VTB Capital.
"It will probably be a slightly hawkish statement preparing the market for the initial tapering in the first quarter of next year."
Spot gold edged up 0.3 percent to $1,227.24 an ounce by 1250 GMT after earlier slipping to $1,220.10, its lowest in a week following a drop of 2.2 percent on Thursday, the biggest fall in 10 days.
U.S. gold futures for February delivery were up $3.30 at $1,228.20.
The Fed's massive bond-buying programme has supported bullion by keeping interest rates low and stoking inflation fears by flooding the markets with cheap dollars.
The metal is headed for its first annual decline in 13 years as investors, buoyed by a recovering global economy, pull money from gold and channel it into riskier assets such as equities.
News that a U.S. budget deal that would avoid a government shutdown in January had sailed through the House of Representatives overnight lifted the dollar to a five-year high against the yen.
A stronger dollar is negative for gold as it makes the metal more expensive to holders of other currencies.
"There's hardly any physical flows, so you're still at the mercy of the dollar sentiment and expectations for (the Fed meeting) next week," Kryuchenkov said.
Holdings in SPDR Gold Trust, the biggest gold ETF, fell the most in nearly two months on Thursday. The fund has not seen inflows in more than a month, hinting that a substantial upside in prices is limited.
But Thursday's price fall did bring back some Asian physical buyers, especially in China. Premiums on the Shanghai Gold Exchange for 99.99 percent purity gold picked up to $10 an ounce from $7 in the previous session.
In other news, Cyprus said it had no plans to sell any gold reserves to fund its 10 billion euro ($13.8 billion) bailout. The island had said in April it would look into the possibility of selling its gold reserves to raise 400 million euros to help finance part of its EU-IMF bailout.
Other precious metals took their cue from gold, with silver rising 0.5 percent to $19.54 an ounce. Platinum was up 0.4 percent to $1,364.25, and palladium gained 0.7 percent to $719.25.
In a sign of the toll that labour unrest in South Africa is taking on mining companies, Northam Platinum said on Friday it expected to lose 500 million rand ($48 million) this year due to a strike by more than 7,000 employees and that talks to end the walk-out would resume only next year.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Keiron Henderson and Jane Baird)