CALGARY, Alberta (Reuters) - 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 sessions.
"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 last week.
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.
(Additional reporting by Clara Denina in London Edititng by W Simon)