* Euro pares gains after contradicting polls on Italian elections
* Markets eye U.S. Fed's Bernanke semi-annual testimony (Updates prices, adds comments)
By Clara Denina
LONDON, Feb 25 (Reuters) - Gold firmed on Monday but pared early gains in tandem with stock markets after exit polls showed an inconclusive result for Italian elections, while Fed Chairman Ben Bernanke's testimony to Congress this week was another reason for caution.
Spot gold was up 0.6 percent to $1,590.41 by 1622 GMT, having earlier hit a session high of $1,594.20, where it found some technical resistance. It hit a seven-month low of $1,554.49 last Thursday.
U.S. gold futures for April delivery rose to a session high of $1,594 an ounce. They were last seen at $1,590.90, still up 1.1 percent.
"Prices started firmer today, but technically they are struggling to go through resistance between $1,595 and $1,600, where support was pegged before the sell-off last week," MKS Capital head of trading Afshin Nabavi said.
"Markets are looking for directions and the support that we saw earlier from a stronger euro is missing this afternoon... they will of course watch the Fed's testimony on Wednesday."
The euro cut most of its earlier gains versus the dollar and the Japanese yen after projections on the Italian elections put Berlusconi's centre right coalition ahead in the Senate, contradicting initial polls showing the pro-reform Democratic Party in the lead. MKTS/GLOB]
Market focus is likely to shift to the United States, where more clues are sought about the country's monetary policy stance. Bernanke will deliver his semi-annual monetary policy report on Feb 27.
"Ben Bernanke may quell speculation about a halt to quantitative easing, supporting gold," Saxo Bank head of commodity strategy Ole Hansen said.
Accommodative monetary policies are seen as positive for the metal, as rampant cash printing would undermine currencies.
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.
Overall confidence in gold was however 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 a note.
"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 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 celebrations.
"No doubt strengthening physical demand for gold from Asian buyers is providing some support for the yellow metal," Standard Bank said in a report.
Spot platinum rose 0.3 percent to $1,610.25 an ounce, after prices fell 3 percent to a five-week low of $1,593.45 on Thursday. Palladium was up 1.4 percent at $746.47 an ounce, having fallen to a one-month trough of $707.22 last week.
Spot silver edged higher 1.5 percent to $29.12 an ounce. (Editing by Veronica Brown and William Hardy)
