* U.S. gold futures hit session high at $1,592/oz
* Markets eye U.S. Fed's Bernanke semi-annual testimony
(Updates prices, adds comments, changes dateline from
By Clara Denina
LONDON, Feb 25 Gold rose on Monday, as rallying
stock markets and a broadly lower dollar helped the metal recoup
some of last week's losses, but investors were cautious ahead of
Fed Chairman Ben Bernanke's testimony to Congress later this
Analysts said the market was also finding background support
from a downgrade of Britain's credit rating by Moody's and signs
that Japan would continue with ultra easy monetary policy.
Spot gold rose 0.7 percent to $1,592 by 1121 GMT. It
hit a seven-month low of $1,554.49 on Thursday after minutes
from the U.S. Federal Reserve's last meeting triggered worries
the central bank might wind down its bond buying programme.
U.S. gold futures for April delivery rose 1.2 percent
to a session high of $1,592 an ounce. It was last seen at
$1,591.50, still up 1.1 percent.
"With supportive news over the weekend, we can argue that we
have removed quite a lot of overhangs seen in gold recently but
we need to see a move above $1,600 and even $1,625 before we
start talking about a recovery," Saxo Bank head of commodity
strategy Ole Hansen said.
Moody's slashed the UK's AAA rating by one notch, raising
prospects of continued loose monetary and fiscal policy, while
Japan is likely to nominate a proponent of aggressive monetary
easing as its next central bank governor.
Accomodative monetary policies are seen as positive for the
metal, as rampant cash printing would undermine currencies.
The focus remains on the United States this week, where more
clues are sought about the country's monetary policy stance.
Bernanke will deliver his semi-annual monetary policy report on
"Ben Bernanke may quell speculation about a halt to
quantitative easing, supporting gold," Hansen said.
Added to that, analysts said that about $85 billion in
across-the-board government spending cuts could kick in on March
1, in a process called sequestration.
"Later this week, a failure to the U.S. sequestration talks
may also imply lower economic growth, which plays in the hands
of gold, as it could also indicate that stimulus could stay with
In other markets, shares firmed, while the euro
bounced from a six-week low against the dollar, but further
upside may be limited as investors eye Italian elections, where
an unstable government could cause another crisis of confidence
in the European Union's single currency.
Overall confidence in gold was still 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.
Gold net long positions fell by 3.5 million ounces to 12.8
million ounces in the week to Feb 21, the lowest level since
May, according to the latest Commitment of Traders data.
"The bulk of the decline in net long positions can be
attributed to a large increase in short positions," HSBC said in
"With near-record short positions on gold, a potential
shortcovering on bullion may lead to higher prices."
Gold speculative short positions stood a multi-year high of
12.5 million ounces.
Buying at lower levels by investors of physical gold in Asia
helped lift prices, while a slower growth in China's
manufacturing sector in February also raised concerns about the
recovery of the global economy, analysts said.
The wedding and festival season are underway in India, the
world's top gold consumer, with jewellery a key part of
Russia and Turkey both raised gold holdings for a second
consecutive month in January, data from the International
Monetary Fund showed, highlighting central banks' interest in
diversifying part of their reserves into bullion.
Spot platinum rose 0.9 percent to $1,619.49 an ounce,
after prices fell 3 percent to a five-week low of $1,593.45 on
Thursday. Palladium was up 1.5 percent at $747 an ounce,
having fallen to a one-month trough of $707.22 last week.
Spot silver edged higher 1.6 percent to $29.14 an
(Editing by Veronica Brown and Keiron Henderson)