BENGALURU (REUTERS) - Gold prices rose to a fresh 6-1/2 month high on Friday (Jan 4) as tumbling share markets on the back of weak US data fanned fears of a global economic slowdown, putting the safe haven metal on track for a third weekly gain.

Spot gold gained 0.3 per cent to US$1,297.20 ($1,766.91) per ounce by 0112 GMT, having earlier touched its highest since mid-June at US$1,298.34. The metal has risen more than 1 per cent so far this week.

US gold futures were up 0.3 per cent at US$1,298.70 per ounce.

The dollar index, which tracks the greenback against a basket of major currencies, edged lower in early Asian trade.

Global markets were on edge on Friday as dire US economic data slammed Wall Street and pushed investors to bet the Federal Reserve could reverse its policy tightening before the end of this year.

Survey data from Institute for Supply Management (ISM) showed that US manufacturing activity slowed sharply to a two-year low in December.

The benchmark US 10-year government note yield fell on Thursday.

Markets are awaiting the December payrolls report on Friday and will look for clues on US interest rates when Federal Reserve chair Jerome Powell meets former Fed chairs Janet Yellen and Ben Bernanke later in the day.

Democrats wasted no time flexing their new power in the US House of Representatives on Thursday as they manoeuvred to pass legislation backed by new Speaker Nancy Pelosi that would end a 13-day partial government shutdown while ignoring US President Donald Trump's demand for US$5 billion for a border wall.

A second referendum on Britain's membership of the European Union would only exacerbate divisions among the British people, Brexit minister Stephen Barclay told a German newspaper.

Holdings of SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, rose to 795.31 tonnes, their highest since early August, indicating investor appetite for the precious metal.