London - Gold was on course for its biggest weekly fall in two months despite edging higher on Friday, a day after a 2% slide on expectations for a US interest rate rise.

Investors took some profits on Thursday on concern that strong gains in January, which have put prices on track for their biggest monthly rise in 1-1/2 years, would not be sustained.

Spot gold was up 0.6% at $1 263.35 an ounce at 12:45 GMT, while US gold futures for February delivery were up $8.20 an ounce at $1 262.80.

Gold is up 6.7% so far this month on uncertainty over European stability, after the Swiss National Bank scrapped the franc's peg to the single currency and the European Central Bank said it would pump billions into the economy.

Expectations that the United States will press ahead with its first interest rate rise in nearly a decade later this year pulled the metal back from five-month highs, however, setting it up for its biggest weekly drop since late in November.

"We've seen these sentiment-driven recoveries in the gold market a couple of times in the past two years, with the start of last year being one example, when it got support from the Ukraine crisis, before fading," Julius Baer analyst Carsten Menke said. "We think this is very much comparable to what we saw last year."

"We're expecting the first interest rate hike early in the fourth quarter, in October," he added. "That's when we think there will be more pressure on gold, because people realise that the interest rate cycle is moving against then."

Appetite for physical gold in Asia overnight remained muted despite lower prices, as buyers awaited further clues on the next direction of trade after a choppy month.

Investors will next be eyeing US fourth-quarter gross domestic product data due out at 13:30 GMT.

Recent weakness across precious metals is likely being driven by long liquidation, UBS said in a note on Friday, as participants look to square positions and book profits ahead of month-end.

READ: Gangs live underground fr months to feed illegal gold trade

"In terms of positioning, gold is most at risk after net longs jumped by as much 58% since the beginning of the year," it said. "Silver comes in next with a 48% increase in net longs."

Silver was up 0.1% at $16.94 an ounce. Spot platinum was up 0.2% at $1 222.36 an ounce, while spot palladium was up 0.5% at $776 an ounce.