Gold bounces as German comments boost euro

LONDON, Oct 21 (Reuters) - Gold built on its earlier gains on Friday after Germany dispelled some of the doubt brewing among investors about the ability of European leaders to definitively tackle the debt crisis, which cut the dollar's advantage over the euro. Disagreement between Germany and France, the biggest contributors to the euro zone bailout mechanism, over how to structure the fund to effectively stem the spread of the crisis has prompted investors to attach a diminishing chance of a resolution any time soon. Gold rose to session highs after sources at the German government there are no serious differences between Germany and France and said banks' recapitalisation should be decided at a meeting of EU finince ministers on Saturday, thereby boosting the euro against the dollar. Dire warnings from ratings agencies over the impact on the creditworthiness of not just vulnerable euro zone members such as Spain, Italy and Portugal, but also others such France, have added to the desire among investors to hold non-euro assets. Gold has increasingly performed like a risk-linked commodity and seen its correlation to European stocks reach its strongest in six months and that with copper rise to an 11-month peak. Yet it has seen strong demand from Asian consumers, which has pushed premiums to their highest since the start of the year.