* Prices extend biggest one-day rally since June * Indian demand still soft as high prices curb buying * Lonmin says will cut expenditure to safeguard cash (Updates prices, adds comment) By Jan Harvey LONDON, July 26 (Reuters) - Gold prices climbed to three-week highs above $1,620 an ounce on Thursday after European Central Bank president Mario Draghi said the central bank was ready to do whatever it takes to preserve the euro, boosting the single currency versus the dollar. The euro surged more than 1 percent against the U.S. unit to target its biggest one-day rise in a month, European shares jumped more than 2 percent and German Bund futures fell after Draghi said the euro was "irreversible". Spot gold was up 1 percent at $1,619.50 an ounce at 1413 GMT, having earlier touched a high at $1,621.41, while U.S. gold futures for August delivery were up $10.40 an ounce at $1,618.50. Sharper appetite for risk and losses in the dollar as a result of the comments also boosted buying of other commodities. A weaker dollar versus the euro makes assets priced in the U.S. unit cheaper for other currency holders. "You've got a rise in the euro, which means a weaker dollar, and a risk-on environment, so everything that looks like a risky asset goes up. Gold has been trading just like a commodity (lately) and is behaving like one today," Natixis analyst Nic Brown said. The metal was building on the previous session's gains, when it posted its biggest one-day rise since late June as weak U.S. data reignited talk of another round of quantitative easing. "The market is still fixated on the question of QE," Brown said. "If we move back to a situation in which the Fed is going to be implementing quatitative easing, you're back in the mindset of a weaker dollar, and there is a real possibility that the market will again look at gold as a safe-haven alternative." Further monetary stimulus would also maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, and boost concerns over inflation much further down the track. HSBC analyst Jim Steel said that gold may take its next cue from second-quarter U.S. GDP data on Friday, with the bank flagging up expectations for a growth rate of 1.1 percent. "If the growth rate... is nearer to 1.0 percent... the FOMC may move closer to a decision to provide even more monetary stimulus in the weeks and months ahead," he said in a note. "Gold has shown itself sensitive to monetary policy announcements this year and any indication of further easing would buoy gold prices." SELLING IN ASIA A rally in gold prices prompted some selling in Asia's physical gold market, but market participants feared the price rise would lose momentum as policy uncertainty keeps sentiment brittle. The world's largest gold-backed exchange-traded fund, which issues securities backed by physical precious metal, reported a 2.1 tonne outflow on Wednesday. The fund saw its biggest weekly outflow of physical metal this year last week. Silver was up 1.4 percent at $27.70 an ounce, while platinum was up 1.2 percent at $1,408.75 an ounce and spot palladium was up 1.7 percent at $571.25 an ounce. Platinum miner Lonmin said on Thursday it had slashed spending plans up to 2014 in order to preserve cash, as it warned poor demand and weak prices battering the sector could persist for longer than expected. South African platinum miners have been hit this year by a combination of rising costs, labour unrest and weak metals prices. However, analysts say it will be tough for them to cut production in a country where unemployment is rife and mining unions hold great sway. (Editing by William Hardy and Alison Birrane)

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