By Sumita Layek
BENGALURU (Reuters) - Gold held in a narrow $5 range on Monday as investors took to the sidelines ahead of the U.S. midterm elections, which may fuel interest in bullion as a hedge against risk if the result sparks volatility in the wider financial markets.
Spot gold was little changed at $1,231.93 per ounce by 1145 GMT, while U.S. gold futures were flat at $1,233.50 per ounce.
"The market is adopting a wait and see approach," said Saxo Bank analyst Ole Hansen.
"We are just a day away from the U.S. midterm election, the outcome of which could have an impact both on currencies and several asset classes, so we're holding relatively stable."
Opinion polls show a strong chance that the Democratic Party may win control of the House of Representatives in the elections after two years of wielding no practical political power in Washington, with Republicans likely to keep the Senate.
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European shares edged up on Monday and the dollar steadied after three straight weeks of gains as investors readied for the elections, which could trigger a bout of volatility for global markets.
"Midterm elections may stimulate safe-haven buying," said Vandana Bharti, assistant vice president of commodity research at SMC Comtrade Ltd.
"If (gold) stays above $1,240, then the next target for the upside should be $1,250- $1,260."
Gold is down more than 5 percent this year, with investors turning to the dollar as a haven from risk as a U.S. trade war with China unfolded, and as higher U.S. interest rates offered better returns than could be found in the non-yielding metal.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.23 percent to 759.06 tonnes on Friday, data from the fund showed.
Hedge funds and money managers raised their net short position in gold by 18,723 contracts to 45,622 contracts in the week to Oct. 30, according to U.S. Commodity Futures Trading Commission data. This was the highest in three weeks.
Among other precious metals, silver was up 0.1 percent at $14.73 per ounce.
Platinum edged up 0.3 percent to $869.60 per ounce, having earlier hit its the highest since June 25 at $873.
The gains in platinum could chiefly be attributed to short covering, considering the CFTC data, which showed "net short positions have been almost entirely reduced", Commerzbank analysts said in a note.
Palladium rose 1 percent to $1,126.97.
(Reporting by Sumita Layek and Eileen Soreng in Bengaluru; Editing by Louise Heavens and Jan Harvey)