COMMODITIES-Oil snaps 6-day run-up; gold at 3-month low

NEW YORK (Dec 28) - Oil closed lower Wednesday, snapping a six-day
run-up,and gold prices fell too, hitting three-month lows, as a rally in
the dollar pressured commodities denominated in the U.S. currency.

Agricultural markets largely bucked the trend. Corn and wheat extended
gains from Tuesday on worries about dry weather in key growing nation
Argentina. Arabica coffee hit a three-week high on fund short-covering.

The 19-commodity Thomson Reuters-Jefferies CRB index fell 1 percent,
weighed down by the drop in U.S. crude oil, its main component, and
losses in gold, silver and base metals such as copper.

Oil's
previous lower close was on Dec. 15, with prices supported thereafter by
lower-than-anticipated U.S. crude stockpiles and tensions between key
producer Iran and the West.

Wednesday's selloff was pinned on the strength of the dollar versus the euro.

The euro fell to a near one-year low against the dollar as the
reluctance to lend by euro zone banks made investors fear more about the
region's economic recovery amid its debt crisis. Data released ahead of
an important Italian bond sale showed European banks hoarding cash,
raising questions about the demand for key raw materials related to
growth, such as oil.

"The worry is that (European) banks are
borrowing and then sitting on the money and not lending it, and that
will limit growth just like it did in the United States," said Mark
Waggoner, president at Excel Futures Inc, an oil and commodities broker
in Bend, Oregon.

U.S. crude fell $1.98, or almost 2 percent, to
settle at $99.36 a barrel. London's Brent oil closed down $1.71 at
$107.56 after falling as low as $106.77 earlier, below its 300-day
moving average.

Aside from the stronger dollar, oil was also
pressured by the lower close in U.S. stocks as a much-anticipated
year-end rally on Wall Street fizzled. The S&P 500 index for U.S.
stocks erased gains for the year as investors shifted focus to what is
expected to be a difficult start to 2012.

The spot price of
gold, which tracks trades in bullion, fell 2 percent, declining for a
third straight days. That has put the precious metal on track for its
smallest yearly gain in three years.

Analysts said a bearish
double-top technical pattern and gold's closing at its lowest level
since July could send more bullion investors heading for the exit.

"When you get so many people who bought gold thinking it was a safe
haven and now under water, that's the reason why it can come off more,
perhaps on dollar strength," said Rick Bensignor, chief market
strategist of Merlin Securities. "The dollar becomes the safe place, not
the gold market.

Spot gold was down 2.4 percent at below $1,554
an ounce by 4:30 PM EST (2130 GMT). It earlier hit a low of $1,553.89,
its lowest since Sept. 26.

Bensignor said gold's technical weekly charts showed the market breaching key support of a three-year rising trendline.

That, he said, could cause gold to fall to $1,425 an ounce based on an
"equal legs down" pattern on technical charts, which measures the
magnitude of bullion's drop from its record high at above $1,920 an
ounce on Sept 6 to a low of $1,534 an ounce on Sept. 26.

Also
weighing on sentiment was news the U.S. Mint has enough American Eagle
gold and silver bullion coins to meet demand and does not expect to
allocate them in early 2012.

Spot silver fell 5.7 percent to $27.03 an ounce, leading the decline in industrial commodities.

Silver is on track to end the year down 11 percent after a $3 drop in
the last five sessions, reversing hefty gains in the past two years.

Benchmark copper on the London Metal Exchange closed down 2.4 percent
at $7,465 a tonne, as worries about slowing growth in top metals
consumer China added to the impact of the stronger dollar. ' Reuters