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METALS-Zinc hits 5-1/2 month low on G20, Iran uncertainties

Eric Onstad

* GRAPHIC-2019 asset returns: (Recasts with zinc touching low, updates prices)

LONDON, June 21 (Reuters) - Zinc hit its lowest since early January and other industrial metals also fell on Friday as investors worried about uncertainties ahead of next week's G20 meeting and rising U.S.-Iran tensions.

Base metals rallied on Thursday after the U.S. central bank signalled rate cuts, while U.S. President Donald Trump approved military strikes against Iran before calling them off at the last minute, the New York Times reported.

"There's a feeling that central banks threw money into the system and markets reacted well yesterday, but now you have a sobering morning," said Oliver Nugent, analyst at Citigroup in London.

Nugent said the market was more concerned that fresh negotiations about a U.S.-China trade deal at next week's G20 meeting might not go well.

"Everyone's got the G20 meeting in their sights right now, and holding a position ahead of that is what's dominating the market," he said.

"We've cautioned that in the event of a trade escalation, the dollar would rally further, oil would be sold off and copper could hit $5,500 or even breach that."

Benchmark zinc on the London Metal Exchange was down 1.9% at $2,421 a tonne by 1400 GMT, the weakest since Jan. 4.

LME copper dropped 0.2% to $5,961 a tonne after hitting a near one-month high of $6,027 on Thursday.

Copper is on course for a 2.4% gain in London this week, in what would be its biggest weekly increase since the week ended March 29. The metal has been partly buoyed by strike action at Chile's Codelco, the world's largest copper producer.

* ALUMINIUM PREMIUMS: Premiums for Japanese aluminium shipments for July to September were set at $108 per tonne, up 3% from the current quarter, as tighter supply in Asia outweighed fears over weakening demand.

* ALUMINIUM POSITION: LME aluminium "exhibits the largest net spec short of the complex on our estimate at 19% of open interest," Alastair Munro at broker Marex Spectron said in a note.

LME aluminium shed 0.5% to $1,772.

* CHINA ZINC STOCKS: Zinc inventories in warehouses monitored by the Shanghai Futures Exchange climbed 7.6% from last Friday to 86,046 tonnes, the exchange said.

* OTHER METALS: LME nickel retreated from a three-week top struck on Thursday, declining 1% to $12,175. Lead fell 0.3% to $1,897.50 and tin lost 1% to $18,965.

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(Additional reporting by Tom Daly in Beijing Editing by Dale Hudson, David Holmes and Jan Harvey)