Tue May 29, 2012 4:25pm EDT
* Gold, oil, wheat, corn, silver, London copper down
* Natgas down more than 5 pct, CRB's biggest decline
* Strong dollar slams gold, down l pct
By Jeanine Prezioso
NEW YORK, May 29 (Reuters) - Major commodity markets
tumbled on Tuesday, pressured by a surging dollar after a
downgrade of Spain's credit rating renewed investor fears
about Europe's debt crisis, despite hopes that Chinese
demand for raw materials would grow and that Greece would
remain in the euro zone.
The euro fell to its weakest level against the dollar
since July 2010 after Egan-Jones ratings cut
Spain's credit rating for the third time in less than a
month. The rising dollar kept pressure on commodities
priced in the U.S. currency even though investors drew
confidence that Greece would sort out its debt problems
from polls that showed the political party that backs an
international bailout was faring well.
The Thomson Reuters-Jefferies CRB index, a
global benchmark for commodities fell 0.78 percent as oil,
gold, London copper, wheat, corn, silver and natural gas
Oil, which is priced in U.S. dollars and reacts
inversely to the currency's moves, was pressured lower by
a stronger dollar.
"Crude oil prices dropped as soon as the Egan-Jones
downgrade of Spanish debt was announced," said John
Kilduff, partner at Again Capital LLC in New York.
"The reaction highlights the nervous state of the
markets over the slow creep toward the precipice of a
market disruption event in the euro zone," he added.
Brent crude oil for July delivery settled 43
cents lower at $106.68 per barrel, after trading as high
U.S. crude oil ended the session at $90.76 per
barrel, down 10 cents.
China's biggest banks were said to have boosted
lending with an eye on infrastructure projects in Beijing.
China has been a major consumer of commodities,
"I think the sense that China might do something is
being supportive of metals," Citi analyst David Wilson
Copper on the London Metal Exchange lost $19
to settle at $7,670 on the euro zone debt worries, but in
New York, copper on COMEX ended the session 1.40
cents higher at $3.4620 per lb.
Natural gas posted the day's biggest decline, dropping
5.4 percent, as the front-month June contract
expired and as forecasts for cooler weather dented
expectations for air-conditioning demand.
In the grains markets, U.S. wheat and corn futures
fell sharply as supply fears eased but soybeans ended
slightly higher on the opposite sentiment.
Precious metals were mixed on Tuesday.
Spot gold was slid 1.4 percent on euro zone
fears and a weaker U.S. dollar, trading at $1,551.50 an
ounce at 2:42 p.m. EDT ( 1842 GMT). Spot palladium XPD=
inched up 15 cents at $601.97 an ounce.
Prices at 3:38 p.m. EST (1935 GMT)