* Spot gold headed for biggest weekly loss in nearly 3 mths * Physical demand strong after price dipped to 2-1/2-mth low * Coming up: U.S. core CPI, Nov; 1330 GMT (Adds details, updates prices) By Rujun Shen SINGAPORE, Dec 16 (Reuters) - Spot gold staged a strong rally on Friday, snapping four sessions of losses with possibly its biggest one-day gain this month, as a smooth Spanish bond auction and upbeat U.S. jobs data supported sentiment. Gold, however, was headed for a weekly decline of nearly 7 percent, its biggest since late September, as funds rushed to liquidate positions with just two weeks left on this year's calendar. "People prefer to hold cash in hand at the year end," said Dick Poon, manager of precious metals at Heraeus in Hong Kong. Investors are also concerned that euro zone's problem will drag well into 2012, which may further boost the dollar and depress dollar-denominated commodities, he added. Solid demand for Spain's bond auction on Thursday and data showing U.S. jobless claims at a 3-1/2-year low gave a reprieve to equities, industrial and precious metals, which have suffered heavy losses this week. Spot gold rallied as much as 1.6 percent to $1,595.3 and traded at $1,593.39 by 0726 GMT, off a 2-1/2-month low of $1,560.36 hit in the previous session. U.S. gold rose 1.2 percent to $1,596.3. The Relative Strength Index on spot gold returned to above 30, after dipping below that mark into the oversold territory for the first time in more than three years. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell 1.1 percent to a one-month low of 1,279.98 tonnes on Thursday. The decline in bullion prices triggered a jump in buying from Asian countries, although a weak rupee depressed interest from India, the world's top gold consumer. "We saw huge physical demand from Thailand and Indonesia," said a Singapore-based dealer. "But there isn't much demand from India, mainly because the rupee is very weak." A record-low rupee has kept local gold prices at lofty levels, depressing buying interest despite the ongoing Indian wedding season. Gold bar premiums were steady at $1 an ounce over spot prices in Singapore, but may edge up next week as supply falls around the Christmas holiday, she added. Spot silver gained more than 2 percent to $29.78 an ounce, before easing to $29.63. The precious and industrial metal was on course for a 8.3-percent weekly decline, its sharpest since late September. Industrial metals also rebounded, with bellwether copper rising 2 percent on the London Metal Exchange. Precious metals prices 0726 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1593.39 23.74 +1.51 12.25 Spot Silver 29.63 0.51 +1.75 -3.99 Spot Platinum 1420.24 16.24 +1.16 -19.65 Spot Palladium 625.22 10.97 +1.79 -21.80 COMEX GOLD FEB2 1596.30 19.10 +1.21 12.30 21818 COMEX SILVER MAR2 29.65 0.38 +1.28 -4.17 3356 Euro/Dollar 1.3027 Dollar/Yen 77.85 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

Source