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PRECIOUS-Gold recovers some post-payrolls losses but faces headwinds

* Gold gains after Friday’s 2.4% decline

* U.S. non-farm payrolls increase 2.5 mln in May

* SPDR gold holdings dip on Friday

* Speculators cut bullish positions in COMEX gold (Recasts and updates prices)

June 8 (Reuters) - Gold gained on Monday as buyers took advantage of cheaper prices after the metal dropped to a one-month low at the end of last week, although safe-haven demand remained subdued as a jump in U.S. employment boosted hopes of a swift economic recovery.

Spot gold was 0.7% higher at $1,696.37 per ounce by 0807 GMT, having dropped as much as 2.4% on Friday after data showed U.S. nonfarm payrolls increased by more than 2.5 million jobs last month - compared with consensus estimates for a fall of 8 million jobs.

U.S. gold futures gained 1% to $1,700.30.

“The narrative around the unemployment data presents a whole smorgasbord of risks to gold going forward, and the upside is going to be quite limited,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.

“Gold is going to struggle to clear the $1,700 level again.”

The strong jobs data bolstered demand for risky assets like stocks, which advanced on Monday.

Market participants are now waiting for the U.S. Federal Reserve’s two-day policy meeting ending on Wednesday, though they have stopped pricing in the possibility of negative rates after the surprise recovery in employment.

“Gold and silver continued to recover this morning as some physical/retail bargain hunters had some pent up demand at the lower levels,” MKS PAMP said in a note.

However, given the increase in U.S. jobs and the likelihood that this trend will be replicated in other countries, there is further scope for more immediate downside, MKS added.

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dipped 0.4% on Friday. Speculators also cut their bullish positions in COMEX gold in the week to June 2.

Elsewhere, silver was up 1.8% at $17.68 per ounce. Palladium fell 1.3% to $1,928.66, and platinum declined 0.6% to $830.78. (Reporting by Harshith Aranya and Brijesh Patel in Bengaluru; Additional reporting by Swati Verma; Editing by Subhranshu Sahu, Kirsten Donovan)

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