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)
By Harshith Aranya
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 XAU= 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 GCcv1 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. MKTS/GLOB
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 GLD , 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. GOL/ETF CFTC/
Elsewhere, silver XAG= was up 1.8% at $17.68 per ounce.
Palladium XPD= fell 1.3% to $1,928.66, and platinum XPT=
declined 0.6% to $830.78.