U.S. nonfarm payrolls data due at 1330 GMT
Markets see 65 chance of Fed rate cut in March
Dollar heads for best week since July

Jan 5 Reuters Gold was headed on Friday for its first weekly drop in four, as reduced bets for an early interest rate cut in the U.S. boosted the dollar and bond yields, while investors awaited a key employment report.

Spot gold was up 0.1 at 2,044.57 per ounce, as of 0601 GMT. It has declined about 0.9 so far in the week.

U.S. gold futures rose 0.1 to 2,051.40.

Gold is down this week as yields and the dollar rebound. That39;s because markets have been scaling back Fed rate cut expectations since the start of the New Year, said Ilya Spivak, head of global macro at Tastylive.

The dollar index rose 0.1 against its rivals and was headed for its best week since July, making bullion more expensive for other currency holders.

Benchmark U.S. 10year Treasury yields , meanwhile, held above 4 and were on track for their best week since October.

Federal Reserve officials were convinced that inflation was coming under control but noted an elevated degree of uncertainty about the rate cut outlook, minutes of the Fed39;s Dec. 1213 meeting showed.

The Fed has already signalled rate cuts this year, so now the question is of degree. Once the excesses of NovDec are corrected, the overall trend this year still favors gold gains for now, added Spivak.

Lower rates decrease the opportunity cost of holding nonyielding bullion.

Market participants have…