* 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 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
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,"
The metal tumbled to a seven-month low of $1,554.49 on
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