By Claudia Assis and Laura Mandaro , MarketWatch SAN FRANCISCO (MarketWatch) -- Gold futures declined and copper futures soared Monday in the wake of China's decision to allow its currency to float more freely against the U.S. dollar, a move that drew investment money into riskier assets such as stocks. Gold for August delivery, the most active contract, declined $2.50, or 0.2%, to $1,255.80 an ounce on the Comex division of the New York Mercantile Exchange. August gold posted an intraday high of $1,266.50 an ounce earlier. Gold swerved in an out of positive territory in earlier trading, following two days of fresh record closings. Bullion closed Friday at $1,258.30 an ounce, the highest settlement since gold futures started trading on Comex in the 1970s. Gold surprised traders, however, for not tanking following news that China's central bank pledged to allow gradual flexibility in how its currency trades against the dollar. See story on China's currency move. The move boosted optimism about global economic growth as it will pump up Chinese consumers' purchasing power and is likely to help the U.S. economy by making its exports cheaper and thus more competitive in global markets, analysts said. It spurred a move to riskier assets such as stocks, with investors eschewing safer bets such as bonds. For bullion, however, "the investment side is looking for any excuse to buy gold," said Afshin Nabavi, head of trading at MKS Finance in Switzerland. Coming off the recent record highs, gold was also vulnerable to some profit-taking and a pullback from physical buyers, said Matt Zeman, a trader with LaSalle Futures Group in Chicago. "[Physical buyers] want to see prices come down a bit" before jumping back in, he added. China's decision also calmed lingering concerns that inflation-minded Chinese authorities could overcompensate and raise interest rates too fast, in the process risking a shock to global growth. Copper for July delivery jumped 10 cents, or 3.6%, to $2.99 a pound, moderating earlier gains. Copper prices had been on a downward spiral since closing at $3.16 a pound May 27. Copper's rise was achieved largely on China's move, Zeman said. China is a top buyer of copper and other base metals and the currency news "makes China's economy more self-sustaining and takes away the threat of inflation," he said. Palladium for September delivery added $9.35, or 1.9%, to $500.75 an ounce. A close above $500 would be the highest for palladium since late April. Platinum for July delivery advanced $18.50, or 1.3%, to $1,607.10 an ounce. Platinum hasn't traded above $1,600 since mid-May. July silver rose 7 cents, or 0.3%, to $19.25 an ounce. "Commodity prices should respond positively to a stronger [yuan], as China is a large net importer of many commodities," said Morgan Stanley analysts Gregory Peters and Jason Draho in a note Monday. A stronger yuan "should be positive for overall risk appetite, signaling the health of both the domestic Chinese and global economies, which is constructive for commodities," they added. Even as China's move weighed on gold, a weaker dollar lended some support to prices. The U.S. dollar index (DXY 85.62, -0.08, -0.10%) fell to 85.58 from 85.704 late Friday. See the latest on dealings in the dollar in Currencies. Also likely to affect metals trading this week, investors will be "on the lookout for comments ahead of next weekend's [Group of 20] summit as well as this week's line-up of economic data, which includes EU consumer confidence, manufacturing and service PMI and revised U.S. GDP," James Moore, analyst at TheBullionDesk.com, said in a Monday note. Meanwhile, the SPDR Gold Trust (GLD 122.41, -0.42, -0.34%) , the largest exchange-traded fund backed by gold, declined 0.2% to $122.60.

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