(Recasts, adds comment, updates prices, changes dateline, prvs Singapore)
* Market awaits Europe meeting next week
* Spot palladium on course for biggest weekly gain in 3
* Coming up: U.S. nonfarm payrolls, November; 1330 GMT
By Maytaal Angel and Rujun Shen
LONDON, Dec 2 Spot gold edged up on Friday as investors sought to hedge against inflation on the view that the European Central Bank will be forced sooner or later to boost liquidity on a massive scale in a bid to alleviate Europe's debt crisis.
Gains were limited, however, ahead of a key U.S. employment report later today.
There was widespread investor expectation that a European summit next week could finally yield a concrete solution to the euro zone debt crisis, with Germany and France working hard to reach a compromise deal.
The new head of the ECB said on Thursday he stood ready to act more aggressively to fight Europe's debt crisis if political leaders agree next week on much tighter budget controls in the 17-nation euro zone.
"The market is betting on some kind of announcement from Europe, (it's) looking for the liquidity button in Europe to be pressed. That will mean high inflation, and that is giving gold the impetus it has been lacking of late," said Saxo Bank analyst Ole Hansen.
Spot gold edged up 0.3 percent to $1,748.99 an ounce by 1053 GMT from 1,743.74. It is on course to rise around 4 percent from a week earlier, its biggest weekly gain in a month.
U.S. gold inched up 0.75 percent to $1,753.40 an ounce.
U.S. non-farm payrolls data later this session was expected to show a pickup in hiring in November, which could boost wider market sentiment by adding to expectations of stronger growth in the world's largest economy.
But analysts said the data is unlikely to have a lasting impact on gold, with the metal set to quickly return to moving in step with the various headlines, good or bad, coming out of Europe.
Gold rallied earlier in the week after the world's major central banks joined forces to boost liquidity, but the momentum quickly faded as investors realised that it could not solve Europe's debt problems.
In this regard, next week's European summit, dubbed as the last chance to save the euro by the popular press, will be key for gold, which has lost ground as a safe haven asset of choice in the current crisis.
"Liquidity is the focus of the market. Gold's appeal as a safe haven may return only when liquidity improves and market sentiment warms up," said Hou Xinqiang, an analyst at Jinrui Futures.
Technical analysis suggested spot gold could drop to $1,722 during the day, said Reuters market analyst Wang Tao.
Supporting sentiment in gold, South Korea's central bank bought 15 tonnes of gold in November, following purchases of 25 tonnes in June and July, as central banks around the world, especially in emerging economies, have aggressively bought bullion over the past few months.
"It's not a surprise, as gold seems to be the only thing central banks can buy to diversify their reserves as economic problems seem to spread around the world," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers.
Spot palladium rose more than 5 percent to hit a day high of $658 an ounce, its highest since mid November and on course for its biggest weekly gain since November 2008. It was later at $650.49 an ounce from $625.30.
Helping the metal was technical buying brought on by gains sparked Thursday following news that Norilsk Nickel, the world's biggest palladium maker, expects the market to be in a deficit in 2012 due to sharply lower Russian supplies.
Silver was at $33.3 an ounce from $32.72, while platinum was at $1,551.99 an ounce from $1,555.25.
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