PRECIOUS-Gold rises on bargain hunting after hitting over 4-mth low

* Spot gold down about 2.5 pct for the week

* Spot gold may drop more to $1,239/oz - Technicals

* Market awaits U.S. payrolls

(Adds comment, weekly milestone; updates prices) Dec 8 (Reuters) - Gold edged up in Asian trade on Friday as investors resorted to bargain hunting after the yellow metal dropped below its recent trading range to hit the lowest in more than four months overnight.

Spot gold was up 0.2 percent at $1,249.04 an ounce,

in the previous session. The metal was down for a third straight week, headed for its biggest weekly decline since early May.

U.S. gold futures were 0.2 percent lower at

$1,250.80. "Even as the dollar is firmer, there seems to be a bit of bargain hunting around. I do, however, think that the pressure is on the downside and rallies will still be sold," a Hong Kong-based trader said. The dollar inched higher on Friday, as the passage of a bill to temporarily extend U.S. government funding raised investors' optimism that a tax reform bill would also pass, and eased fears of a government shutdown for now. Investors were, however, wary of the possibility of escalating tensions in the Middle East after President Donald Trump recognized Jerusalem as the capital of Israel.

"Gold might have found some support in that but it seems to be just the dollar strength across the board now heading into the end of the year," the trader said. Markets are eyeing U.S. non-farm payrolls report due later in the day, which will be last employment report before the Federal Reserve meeting next week at which the bank is expected to raise benchmark interest rates. Higher U.S. interest rates tend to boost the dollar, making greenback-denominated gold more expensive for holders in other currencies. "The upcoming U.S. data is something which everyone is looking at and completely ignoring the fact that the situation in the Middle East has far larger potential of becoming explosive," said Naeem Aslam, London-based chief market analyst at Think Markets. Meanwhile, Asian shares rallied for a second session on Friday on upbeat economic data, and cryptocurrency bitcoin shot above $16,600 on the Bitstamp exchange to its highest ever.

"Market-watchers are likely positioning for a FOMC rate hike next week. Overnight, the improvement in risk appetite considering the postponing of the U.S. partial government shutdown and further progress in Brexit talks should buoy market sentiment into the next week," said OCBC analyst Barnabas Gan. Spot gold may drop more to $1,239 per ounce, according to Reuters technicals analyst Wang Tao.

Silver rose 0.4 percent to $15.78 an ounce, but was

headed for a third week of losses.

Platinum climbed 0.5 percent to $896.40 an ounce, but

was set to post its biggest weekly fall since March.

Palladium was 0.3 percent higher at $1,016.20.

(Reporting by Apeksha Nair in Bengaluru; Editing by Sherry Jacob-Phillips and Vyas Mohan)