PRECIOUS-Gold rises nearly 1 pct on Wall St losses, euro zone worry

Mon Feb 25, 2013 4:52pm EST

* Uncertain Italian vote results stir euro zone debt fears
    * Rebound seen possible after funds slashed gold positions
    * Markets eye semiannual testimony by U.S. Fed's Bernanke
    * Coming up: U.S. S&P home prices, consumer confidence Tues.

 (Recasts, adds comments, market details, updates prices)
    By Frank Tang
    NEW YORK, Feb 25 (Reuters) - Gold rose about 1 percent on
Monday as a sharp pullback in U.S. equities and uncertainty over
the outcome of Italy's parliamentary election led to resurgent
safe-haven buying, extending bullion's rally to a third day.
    Bullion climbed near $1,600 an ounce after conflicting early
forecasts of Italy's vote results raised fears that a divided
parliament in the debt-laden country could hamper euro zone
stability. The S&P 500 index fell almost 2 percent.
 
    Recent comments by top Federal Reserve officials suggesting
the U.S. central bank could reduce or halt its asset buying had
hit gold's inflation-hedge appeal. Investors now look to Fed
Chairman Ben Bernanke's semiannual testimony to Congress this
week for clues on the future of U.S. economic stimulus.
    "Clearly, gold could be going up ahead of the Bernanke
testimony tomorrow. And gold has had quite a wash-out, so on a
relative basis it is more attractively priced than other
assets," said Axel Merk, chief investment officer of Merk Funds,
which manages $630 million in mutual fund assets.         
    Spot gold rose 0.9 percent to $1,594.14 an ounce by
4:07 p.m. EST (2107 GMT), having hit a high of $1,596.80.
    U.S. gold futures for April delivery settled up
$13.80 at $1,586.60, with trading volume in line with the
250-day average, preliminary Reuters data showed.
    Overall confidence in gold, however, remained fragile, with
holdings of the SPDR Gold Trust falling 42.3 tonnes to
1,280.67 tonnes last week, its largest weekly outflow since
August 2011. 

    ECONOMIC UNCERTAINTY
    Also underpinning gold was U.S. economic uncertainty related
to $85 billion in across-the-board government spending cuts
scheduled to take effect on Friday. 
    "Gold had a 'near-term bottom-out' here. We had a steep
selloff in the last few weeks," said Ron Florance, managing
director of investment strategy at Wells Fargo Private Bank.
    "We think there is a near-term opportunity for a bounce up,"
Florance said.
    The metal tumbled to a seven-month low of $1,554.49 on
Thursday. 
    Hopes for a short-covering rebound grew after hedge funds
and money managers had cut their net long gold futures and
options positions to a four-year low, analysts said.
 
    "The fact that net longs are now relatively small suggests
plenty of scope for a renewed surge in buying, including
short-covering," Capital Economics strategists said in a note.  
 
    Among other precious metals, silver rose 1.2 percent
to $29.02 an ounce. 
    Platinum eased 0.3 percent to $1,600.75 an ounce,
after prices fell to a five-week low of $1,593.45 last week.
Palladium inched down 0.1 percent to $734.97 an ounce,
having fallen to a one-month low last week.
 4:07 PM EST     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold APR   1586.60  13.80   0.9  1574.70 1596.50  153,123
 US Silver MAR  28.987  0.527   1.9   28.540  29.215   53,081
 US Plat APR   1620.70  13.30   0.8  1597.70 1630.80   13,470
 US Pall MAR    749.05  13.75   1.9   734.75  752.35   11,654
                                                              
 Gold          1594.14  13.84   0.9  1575.73 1596.80         
 Silver         29.020  0.330   1.2   28.600  29.240
 Platinum      1600.75  -4.49  -0.3  1600.25 1627.25
 Palladium      734.97  -1.03  -0.1   739.01  750.00
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        176,177   198,366   173,949        16    0.22
 US Silver       84,802    58,311    53,176     24.29    0.01
 US Platinum     13,863    14,314    11,292     19.42   -0.04
 US Palladium    21,062     7,112     4,919                  
                                                              
     

 (Additional reporting by Clare Denina in London; Editing by
Dale Hudson)