UPDATE 6-Gold recovers from 4-mth low as dollar cools

                                
   (Recasts, updates with quotes, prices) 
                                
 By Atul Prakash
                                
 LONDON, May 2 (Reuters) - Gold recovered from a four-month
low on Friday as the dollar retreated from the day's highs, with
analysts expecting future volatility to be driven by gyrations
in the greenback and possible fund sales.
                                
 Spot gold <XAU=> fell as low as $845 an ounce after the
dollar jumped following better-than-expected U.S. jobs data, but
the metal rebounded when the price dipped below $850 an ounce
and attracted fresh buyers, analysts said.
                                
 It was at $854.20/855.40 at 1440 GMT against $850.25/851.65
in New York late on Thursday.
                                
 "It will stay very volatile for sure and we need to have our
eyes on the forex market so when the dollar is able to recover
more, 800 is probably the next target on the gold side," said
Michael Kempinski, senior precious metals trader at Commerzbank.
                                
 "I think the physical off-take is not enough to absorb all
the selling which is coming out of the funds which still have
massive long positions," he said.
                                
 The dollar jumped to two-month highs versus the yen <JPY=>
after data showed the U.S. economy lost just 20,000 jobs in
April, fewer than economists had forecast. [ID:nN02320385]
                                
 The U.S. jobs report bolstered expectations that the Federal
Reserve may be nearing the end of its rate-cutting cycle and
backed a growing view that the U.S. economic slowdown may not be
as deep as some originally thought. [ID:nN02551119]
                                
 A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
                                
 Oil <CLc1> rebounded after three straight days of falls,
drawing support from the U.S. data. [ID:nSP110450]
                                
 News that the Cano Limon Covenas oil pipeline in Colombia
had been shut down following a rebel bomb attack also boosted
the crude market.
                                
 
                                
 GOLD LOSES "FLAVOUR"
                                
 Some analysts expected the gold market to hold above the
$850 level.
                                
 "But if it is broken convincingly, then the whole precious
metals complex might go down further," said Wolfgang
Wrzesniok-Rossbach, head of sales at Heraeus, a German precious
metals trading group.
                                
 "People are perhaps looking elsewhere, such as equities. It
seems gold is not the flavour of the day."
                                
 Gold held in New York-listed StreetTRACKS Gold Shares
<XAUEXT-NYS-TT>, the world's largest gold-backed exchange-traded
fund, has fallen to 580.45 tonnes, shedding nearly 10 percent of
its holdings in the last 10 days.
                                
 In other markets, U.S. gold futures rose, with the June
contract <GCM8> rising $5.2 an ounce to $856.
                                
 Platinum <XPT=> was at $1,863/1,883 an ounce from
$1,860.50/1,880.50 late on Thursday, while palladium <XPD=> was
up $2 at $408/416 an ounce. Silver <XAG=> rose to 16.38/16.43 an
ounce from $16.16/16.22.
  (Reporting by Atul Prakash and Tamora Vidaillet; editing by
Peter Blackburn)