PRECIOUS-Gold inches lower amid rising equities as Mideast tensions fade

Sumita Layek

(Updates prices)

* U.S. non-farm payrolls due at 1330 GMT

* Dollar index on track to post best week in 2 months

* SPDR Gold holdings fell 0.5% on Thursday

* Palladium set to register best week since mid-June

Jan 10 (Reuters) - Gold prices edged down on Friday, after declining as much as 1% in the previous session, as easing tensions in the Middle East prompted investors to move back to riskier bets.

Spot gold fell 0.1% to $1,550.66 per ounce by 0732

GMT. Prices fell to their lowest since Jan. 3 at $1,539.78 on Thursday.

U.S. gold futures eased 0.2% to $1,551.60.

Meanwhile, global stocks rallied to hit record highs after comments from U.S. President Donald Trump and Iran pointed to a de-escalation in military tensions, even as the U.S. increased sanctions on Iran. "We are looking at the risk-on sentiment, a stronger dollar, and surging equities," Stephen Innes, a market strategist at AxiTrader said. "Besides the U.S. president suggesting that Iran is standing down, House Speaker Nancy Pelosi's legislation to limit Trump's executive powers against Iran is reducing the pressure in the Mideast." The U.S. House of Representatives on Thursday passed a resolution to stop Trump from further military action against Iran. Gold, a safe asset during political and economic uncertainties, had surged over $1,600 on Wednesday after Iran launched missile strikes on U.S. forces in retaliation to the killing of its top commander in a drone attack.

Further weighing on gold, the dollar looked set to

post its best week in two months. On the trade front, a 'Phase 1' trade deal between Washington and Beijing could be signed shortly after Jan. 15, Trump said on Thursday. Investors now await U.S. non-farm payrolls due at 1330 GMT. "Gold remains on the back foot in Asia ... as traders price out the geopolitical risk in precious metals," Jeffrey Halley, a senior market analyst for the Asia-Pacific region at OANDA said in a note. "A break of $1,540 implies that a deeper correction to $1,520 could occur." Indicative of sentiment, holdings of the world's largest

gold-backed exchange-traded fund SPDR Gold Trust , fell

0.5% to 882.12 tonnes on Thursday.

Elsewhere, palladium fell 0.3% to $2,101.81 an ounce,

having hit a record peak of $2,149.50 in the previous session on supply woes. For the week, the metal was set to post its best week since mid-June, rising nearly 6% so far.

Silver rose 0.2% at $17.93 per ounce, but was ontrack for its worst week in five, while platinum edged up

0.2% to $968.49.

(Reporting by Sumita Layek in Bengaluru; Editing by Arun Koyyur and Rashmi Aich)