Gold prices edged up on Friday and were set for a second straight weekly gain, while traders awaited U.S. employment data to gauge the trajectory of the Federal Reserve's potential interest rate cuts.

Spot gold rose 0.2% at $2,359.73 per ounce, as of 0204 GMT and was up more than 1% for the week. U.S. gold futures was down 0.1% to $2,366.10.

The U.S. dollar was on track for a weekly decline, making dollar priced-bullion more attractive to buyers holding other currencies.

"Gold has enjoyed a productive week so far, with the precious metal being a beneficiary of some weaker U.S. macro data," said Tim Waterer, KCM Trade's chief market analyst.

Economic data on Wednesday, including weak services and ADP employment reports, pointed to a slowing U.S. economy. A separate report showed an increase in initial applications for U.S. unemployment benefits last week.

Market spotlight is on the U.S. nonfarm payrolls report due at 1230 GMT.

"If the jobs data misses the mark on the lower side, I expect investors will start to further fancy a possible September rate cut from the Fed, which could see gold have another crack at the $2,400 level," Waterer said.

"Gold has been in consolidation mode above $2,300, which bodes well for potential further price gains once we eventually move towards a lower interest rate environment."

Traders are currently pricing in about a 73% chance of a Fed rate cut in September, according to CME FedWatch Tool.

Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Spot silver rose 0.4% to $30.53 and was headed for its best week since May 17.

Platinum fell 0.3% to $999.86. Palladium gained 0.4% to $1,021.75 and headed for a third consecutive weekly gain. (Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Sonia Cheema and Rashmi Aich)