PRECIOUS-Gold edges up on Europe political risk, but U.S. rate outlook drags

    * Worries over Dutch elections help stoke demand for bullion
    * But widely expected U.S. interest rate hike remains key
    * Speculators slash net gold long positions in week to March
    * SPDR Gold holdings fell 1 percent on Friday

 (Adds comment, updates prices)
    By Sethuraman N R
    March 13 (Reuters) - Gold edged up on Monday on safe-haven
demand ahead of elections in Europe, moving further away from
five-week lows touched late last week in expectation of an
imminent rise in U.S. interest rates.
    Spot gold        had climbed 0.3 percent to $1,208.61 per
ounce by 0634 GMT, while U.S. gold futures         were up 0.6
percent at $1,208.10 an ounce.
    "People are now quite sure that interest rates will go up.
Now, pretty much everything is discounted into the gold price,"
said Yuichi Ikemizu, head of commodity trading at Standard Bank
in Tokyo.
    Spot gold fell to its weakest since Jan. 31 at $1,194.55 on
Friday, but recovered to hit a high of $1,206.36.
    "Looks like people are ready to buy gold below $1,200 and it
is sort of a psychological level. Think people got confounded
after Friday's move and the short ones are buying back now,"
Ikemizu said.
    But expectations that the U.S. Federal Reserve will raise
rates this week are likely to drag on gold prices. The metal is
sensitive to higher U.S. rates as they increase the opportunity
cost of holding non-yielding bullion, while boosting the dollar,
in which it is priced.             
    "Gold should find some safe-haven bids at these levels this
week as the Dutch election became more fraught over the
weekend," said Jeffrey Halley, a senior market analyst with
    Worries surround this week's parliamentary election in the
Netherlands, which faces political disarray as mainstream
parties struggle to forge a viable coalition.             
    Meanwhile, holdings of SPDR Gold Trust      , the world's
largest gold-backed exchange-traded fund, declined 1.06 percent
to 825.22 tonnes on Friday.          
    Hedge funds and money managers slashed their net long
positions in COMEX gold from the highest in three months in the
week to March 7, and cut it slightly in silver, U.S. Commodity
Futures Trading Commission data showed on Friday.             
    "I don't think gold will go down from here. European
political situation looks unpredictable," Ikemizu said.
    "People can't aggressively short gold and still a lot of
them feel that they want gold and (should) be ready for anything
that is happening in Europe."
    Silver        rose 0.1 percent to $17.06 an ounce on Monday,
after falling to its lowest since Jan. 27 at $16.78 late last
    Platinum        advanced 0.3 percent to $944.60 an ounce. It
fell to its lowest since Jan. 4 in the previous session at
$928.50. Palladium        was up 0.5 percent at $747.73 an

 (Reporting by Nallur Sethuraman in Bengaluru; Editing by Joseph
Radford and Subhranshu Sahu)