* China's move to unpeg yuan from dollar boosts commods
* Dollar weakens after China move, hits 1-mth low vs euro
* Net long positions in platinum, palladium futures rise
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, June 21 (Reuters) - Gold prices rose to a record
high at $1,264.90 an ounce in Europe on Monday as a slip in the
dollar added impetus to the metal's existing rally on the back
of rising concerns over financial and sovereign risk.
The metal later eased back below $1,260 an ounce, however,
as news that China was to lift the yuan's peg to the dollar to
allow greater flexibility in its exchange rate, which hurt the
U.S. currency, lifted interest in assets seen as higher risk.
Spot gold <XAU=> was bid at $1,258.15 an ounce at 1030 GMT,
against $1,255.35 late in New York on Friday. U.S. gold futures
for August delivery <GCQ0> rose $1.30 an ounce to $1,259.60.
Gold prices have risen more than 15 percent this year as
rising concerns over sovereign debt levels in Europe and the
prospect of further financial market instability boosted
interest in the precious metal as a haven from risk.
Its long-running inverse relationship with the dollar
weakened as risk aversion fuelled buying of both assets, but a
slide in the U.S. currency on Monday is now adding further
impetus to its run higher, analysts said.
"It might be that there may be an asymmetry now -- dollar
strength can help gold, and dollar weakness can help gold as
well," said Michael Lewis, head of commodities research at
Deutsche Bank.
"Central banks globally do have quite high dollar reserves
and the idea that they may now in aggregate be buying gold is an
interesting signal of the message that sends on their U.S.
dollar holdings, that they are probably overweight."
Gold priced in currencies other than the dollar remained
below recent record highs on Monday.
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The euro <EUR=> hit its highest levels in about a month
versus the dollar on Monday after a pledge from China that it
would allow greater flexibility in its currency. []
Asian currencies and stocks rose and U.S. Treasuries fell on
expectations that China's promise to give the currency new room
to move would ease political tensions with the West and
encourage investors to snap up riskier assets. []
"The dollar was sold off across the board as market players
reacted to the likelihood of the USD playing a less important
role in China's exchange rate mechanism," said Credit Agricole
in a note.
EQUITIES, COMMODITIES RISE
European shares rose for the ninth session to a five-and-a
half week high after China's move boosted confidence in the
global economy. []
Other commodities were also sharply higher, with copper and
zinc prices rising more than 3 percent and oil up more than $1 a
barrel to above $78. Analysts are betting that Chinese imports
of key commodities may rise. [] []
Strength in industrial metals lifted silver, platinum and
palladium. Silver <XAG=> was bid at $19.32 an ounce against
$19.10, having earlier hit its highest since May 17 at $19.53.
Platinum <XPT=> was at $1,596 an ounce against $1,585.50,
having earlier hit its highest since May 20 at $1,606.50 while
palladium <XPD=> was at $496.10 against $487.50. Earlier the
autocatalyst metal hit a four-week high at $499.
Speculators in New York platinum and palladium futures
lifted their net long positions in the metals last week, with
open interest in NYMEX palladium futures staging its largest
weekly rise since late March.
Both metals may be supported by increased flexibility in the
yuan exchange rate, said UBS analyst Edel Tully in a note.
"Platinum and palladium... stand to benefit from becoming
cheaper in local terms," she said. "China is an important
consumer of palladium in particular for auto production, so yuan
appreciation should boost (platinum group metals) demand."
(Reporting by Jan Harvey; Editing by Alison Birrane)
