Gold gained on Monday on bargain hunting and purchases from jewelers but investors were on the sidelines after a European bank stress test showed few surprises and failed to spur safe-haven buying last week.

Platinum rose to its strongest in nearly a month on fund buying driven by gains in equities. Asian shares rose as solid U.S. corporate earnings and strong euro zone data offset growing skepticism the banks were not rigorously examined.

Seven of 91 banks failed the stress test of possible losses in sovereign debt holding, including ones in Greece and Spain, for an overall capital shortfall of $3.5 billion euros.

Spot gold rose $2.45 to $1,191.50 an ounce by 1:53 a.m. ET after a volatile session on Friday, when it briefly crossed $1,200 before falling sharply. Gold struck a lifetime high at $1,264.90 in early June.

There's a bit of buying from jewelry makers. I think investors are on the sidelines. The price is a bit too high and there are other things which are more attractive for investment, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

Sentiment for gold is a bit flat. Stocks have obviously been bullish. I think gold may have a chance to test $1,180, said Leung, referring to a low seen last week and a possible shift from gold to equities.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings were unchanged at 1,302.046 tonnes. The holdings hit a record at 1,320.436 tonnes on June 29.

U.S. gold futures for August delivery added $3.5 to $1,191.3 an ounce after settling nearly $8 lower following the European stress tests.

I think we are seeing a combination of a thin market plus physical buying, especially when prices were hitting lows, said a physical dealer in Singapore. But the demand doesn't seem to be as tremendous as the last round, he added.

Money managers cut their long, or bullish exposure, to U.S. gold futures by 18 percent for the week to July 20 as the precious metal's prices hit two-month lows, trade data on Friday showed.

Silver was steady, palladium gained more than $2, while sister metal platinum rose as high as $1,551 an ounce, its highest since late June.

Analysts see platinum prices rising as a gradual economic recovery leads to increased demand for the metal used in autocatalysts, but some of the euphoria that lifted forecasts earlier this year has evaporated after a hefty correction in May, a Reuters poll showed.

(Editing by Ed Lane)