By Rujun Shen

SINGAPORE (Reuters) - Gold slipped on Friday, on course for a second straight week of losses, as a weaker euro sapped appetite for bullion amid the debt crisis in Europe while investors awaited a key U.S. employment report later in the day for further trading cues.

Gold briefly moved in tandem with the dollar in the previous session as safe-haven appetite overflowed from the greenback and U.S. Treasuries, but that quickly came to an end as Asian investors started the day fretting over the euro zone situation.

"It's an extension of the fear trade," said Nick Trevethan, senior metals strategist at ANZ in Singapore.

"With big euro zone risk bubbling just below the surface and occasionally rising to a popping force, people are just uncomfortable holding risk, even gold. All and all, bears are back in the woods again."

Spot gold slipped 0.3 percent to $1,558.25 an ounce by 0641 GMT, recovering from an intra-day low at $1,548.50. Gold fell 6.3 percent in May, the steepest monthly fall since December. It was headed for an almost 1-percent weekly loss.

Gold had fallen nearly 20 percent from its peak of $1,920.30 hit last September, flirting near the edge of a technical bear market. The most-active U.S. gold futures contract for August delivery dropped 0.2 percent to $1,559.90.

Bullion was pressured by a weaker euro, which dropped to its lowest level against the dollar in nearly two years, dogged by worries that Spain may need external aid to shore up its struggling banking sector and fix its public finances.

Prices are likely to remain volatile as investors follow the twists and turns in euro zone's struggle with the debt crisis and assess the possibility of more monetary stimulus, with the focus on June 17 Greek elections that may decide if the country will break away from the single currency bloc.

"It's not hard to come up with a rationale for a decent rebound if you are tied to the belief that Europe will end up in a central-bank led rescue of some kind, but the bar for such action is high," said a Singapore-based trader.

Originally posted here:

Gold heads for weekly loss on euro zone woes