Gold held firm on Friday after upbeat U.S labour market data soothed immediate fears of a recession, but longer-term uncertainty about economic growth and concerns about the euro zone debt crisis supported demand for the precious metal.

Autocatalyst metals platinum and palladium both hit their lowest levels since late June at $1,674.95 and $727.43 an ounce respectively, and were on track to post their biggest weekly falls in two months. A deteriorating economic picture and expectations of lower vehicle sales prompted investors to sell their holdings.

Spot gold was bid at $1,658.79 a troy ounce by 1322 GMT, from $1,647,90 an ounce late in New York on Thursday when it hit a record high of $1,681.67.

The precious metal edged down slightly from earlier highs after data showed U.S. job growth accelerated more than expected in July.

But a weaker dollar against a basket of currencies helped support the precious metal. A weak dollar makes gold cheaper for holders of other currencies.

"Gold is waiting to see where equity markets settle. There may be some position covering in equities and potentially some position covering in gold as well," said Ole Hansen, analyst at Saxo Bank.

Investors nerves were also rattled by growing unease over the euro zone debt crisis, which is threatening to spill over to larger economies such as Spain and Italy, sending bond yields of the two countries soaring.

With few other places to go, the metal still looks attractive to investors trying to maintain the value of their capital.

"There is a perfect storm for gold prices given the uncertainty about the debt crisis in Europe and the U.S., with... the dollar easing," said Arne Lohmann Rasmussen, an analyst with Danske Bank.

"It's one of the few safe havens left in the financial world at the moment," Rasmussen said.

Gold has risen more than 17 percent this year as loose monetary policy in the United States in recent years has weighed on the dollar. Investors also use the metal as a hedge against inflation.

U.S. gold futures rose to $1,661 an ounce.

UPWARD REVISION

Citing enhanced contagion risk from the European debt crisis, Morgan Stanley lifted its 2011 gold price forecast to $1,511 an ounce from $1,401 and raised this year's silver price forecast to $36.21 an ounce from $31.39.

"Given current market anxieties regarding debt and growth, silver prices are likely to revisit their recent highs as all of the drivers for the September 2010 to April 2011 price surge remain intact," Morgan Stanley said.

Silver tracked gold prices higher, rose to $39.39, from $38.81 on Thursday.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust , was unchanged on Thursday from Wednesday, while holdings of COMEX Gold Trust rose 1.9 percent.

Platinum extended losses from the previous session when it fell following news that Impala Platinum had improved its wage offer to avert a strike.

It fell to $1,707.00 from $1,717.80 on Thursday.

"The PGMs (platinum group metals) continue to succumb to selling pressure ... amid concern of slowing economic activity and the threat slowing economic activity will reduce auto-catalyst and jewellery related demand," James Moore, an analyst at thebulliondesk.com wrote in a note.

Palladium edged down to $740.72 from $741.18 on Thursday.

(Editing by Alison Birrane)