* Gold extends gains after strongest week in a month
* Asian demand for physical gold remains high
* SPDR Gold Trust holdings fall to 4-year lows
By Nia Williams
CALGARY, Alberta, May 27 Gold rose on Monday,
extending gains after its strongest week in a month as the
dollar edged lower and European stock markets steadied, while
physical buying remained strong in Asia.
Volumes were likely to remain thin throughout the day as
both Britain and the United Sates had public holidays.
Spot gold rose two percent last week, mostly benefit
ting from a lower dollar and a shift of funds out of equities.
It was up 0.6 percent to $1,394.47 an ounce by 1609 GMT.
U.S. gold futures for June delivery rose 0.4 percent
to $1,392.6 an ounce.
Gold is still down nearly 17 percent this year, however,
after last month's rout pushed prices down to a more than
two-year low of $1,321.35. The drop was caused by worries about
central bank sales and fuelled by a break below key support at
$1,500 an ounce.
"Gold is holding around the levels seen at the end of last
week, as there are few factors that are balancing each other out
at the moment," Commerzbank analyst Daniel Briesemann said.
"On the one side you have continued ETF (exchange-traded
fund) outflows and speculators cutting bullish bets on COMEX,
while on the other hand the metal is finding some support from
continued demand for coins and bars amongst retail investors and
ongoing purchases by central banks from emerging countries,
which kept buying in April."
Holdings in SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 0.24 percent to 1,016.16
tonnes on Friday, their lowest since mid-February 2009. The fund
held 1,350.50 tonnes of gold at the beginning of 2013.
Speculative net long positions - the difference between
bullish and bearish contracts - held by COMEX gold futures and
options hedge fund traders, fell to 35,686 lots in the week to
May 21, the lowest level since July 2007, while short positions
continued to rise, a report by the Commodity Futures Trading
Commission (CFTC) showed on Friday.
Traders said that the expiry of June COMEX options, on
Tuesday, may leave the market around current levels in coming
"COMEX option expiry tomorrow and good sized open interest
at $1,400 will likely see the market sticky around here for at
least the next few sessions," MKS Capital senior trader Alex
Thorndike said in a note.
Physical demand for the metal remained strong in Asia, where
premiums for gold bars hit a record high amid tight supplies
Lower spot prices over the past month have attracted buyers
mainly in China, the world's second biggest consumer of the
precious metal after India, traders said.
Data from the International Monetary Fund (IMF) showed that
Russia, Turkey and Kazakhstan were among the central banks
buying gold in April, despite the metal's price fall, to
diversify their strategic portfolio.
The dollar index was still 0.1 percent lower, while
European shares steadied as markets waited for more macro
economic data out of the United States to assess whether the
Federal Reserve will slow its $85-billion monthly bond purchases
in coming months.
Silver rose 1.2 percent to $22.68 an ounce, platinum
was up around 0.5 percent at $1,451 an ounce and
palladium edged up 0.7 percent to $731.97 an ounce.