* Fresh ECB bank funding lifts euro, stocks * Trade expected to remain cautious into year-end * Gold:silver ratio stays near lowest in a year (Updates throughout, previous SINGAPORE) By Jan Harvey LONDON, Dec 21 (Reuters) - Gold rose back above $1,640 an ounce on Wednesday as the euro continued its break higher versus the dollar, after a tender for cheap loans from the European Central Bank saw a greater take-up among banks than expected, easing fears of a credit crunch. Spot gold hit a high of $1,641.50 and was up 1.4 percent at $1,637.19 an ounce at 1042 GMT, further recovering from last week's drop to a near three-month low. It is up more than 15 percent this year. European shares and other commodities such as oil also rose, taking pressure further off gold, which was caught up in selling of other financial assets earlier this year as investors liquidated bullion holdings to cover losses elsewhere. "The key thing here is the very strong euro rebound," said VTB Capital analyst Andrey Kryuchenkov. "Peripheral bond yields are down across the euro zone. Commercial banks can use the lending facility from the ECB, with rates that are very low, to buy bonds, which are higher yielding." "Because gold is so closely correlated with equity markets, with the dollar, you've had this rebound." Bullion, like other dollar-priced assets, tends to benefit from weakness in the U.S. currency, as it becomes cheaper for holders of other currencies. Banks took a huge 489 billion euros at the ECB's first ever offering of three-year funding on Wednesday, providing hope a credit crunch can be avoided. "You have to regard it as a positive result," said Societe Generale analyst James Nixon. "This is at least a solid 240 billion euros (net) increase for banks." The euro climbed in response, stock markets rose and Italian and Spanish bond yields fell. Further signs that Europe's funding crisis is easing would be positive for the euro.

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