November 8, 2012 / 11:07 PM / 6 years ago

COMMODITIES-Oil recovers, gold up, but 'fiscal cliff' fears loom

* Sugar at two-year low on Brazilian harvest data
    * Wheat climbs for 4th day ahead of monthly crop report
    * Cocoa futures drop on heavy volume

    By Julie Ingwersen
    CHICAGO, Nov 8 (Reuters) - U.S. crude oil futures firmed on
Thursday, recovering a day after from their worst single-day
slide this year, but worries about Europe's economy and looming
negotiations over the U.S. "fiscal cliff" hung over the market
and muted gains.
    Gold rose to a three-week high as investors continued to bet
on easier U.S. fiscal policy following President Barack Obama's
    Both crude and gold got late-day pushes after the Pentagon
said Iranian warplanes fired at an unarmed U.S. drone in
international airspace last week but did not hit the aircraft.
    "Something popped after the Pentagon confirmed Iran shot on
a drone last week," said a New York-based broker.
    Crude oil's rebound came after Brent futures dropped nearly
4 percent and U.S. crude slumped almost 5 percent on Wednesday
as problems facing European and U.S. economies applied pressure,
along with data showing rising U.S. oil stockpiles.
    The Thomson Reuters-Jefferies CRB index, a
bellwether for commodities, crept up 0.1 percent, after falling
nearly 2 percent a day earlier, its biggest one-day drop since
Sept. 17.     
    U.S. stock markets fell for a second day on worries about
Washington's ability to find a timely solution to the "fiscal
cliff," a $600 billion package of automatic spending cuts and
tax increases due to take effect early next year that could push
the U.S. economy back into recession.
    After Obama won a second term on Tuesday, anticipation
heightened that Democrats and Republicans would move quickly to
address the looming crisis, but anxiety gripped traders.
    "The fears about Europe's economy remain, and we still are
worrying about the 'fiscal cliff' facing the United States,"
said Phil Flynn, an analyst at Price Futures Group.
    The Dow Jones industrial average was down 121.41
points, or 0.94 percent, to end unofficially at 12,811.32. The
Standard & Poor's 500 Index fell 17.02 points, or 1.22
percent, at 1,377.51. The Nasdaq Composite Index was off
41.70 points, or 1.42 percent, to close unofficially at
    Gains in dollar-backed commodities were capped by strength
in the dollar, which rose to a two-month high against the euro
 after the European Central Bank held interest rates at a
record low and said the euro zone's economy showed little sign
of recovering before year-end. 
    ECB President Mario Draghi said after the bank decided to
hold rates steady at 0.75 percent that the ECB cannot do much
more to help Greece with its debt burden and gave Spain no
assurance that ECB bond buying will lower its borrowing costs. 
    Raw sugar futures posted the lowest close in more than two
years as dry weather helped speed up harvest in top grower
    March sugar futures finished down 0.11 cent, or 0.6
percent, to settle at 18.84 cents a lb, the spot contract's
weakest finish since August 2010. The contract pared earlier
losses, when it fell to 18.69 cents.
    For the first time in this April-to-March season, Brazil's
main center-south cane belt surpassed last year's cumulative
sugar output after dry weather in the past months helped mills
recover ground lost to a slow, wet start to harvest.
    Sugar cane industry association Unica reported sugar output
in the second half of October was up 73 percent at 2.55 million
tonnes from the same period a year ago, with ethanol output up
54 percent and cane crushing up 56 percent. 
    The data was released late in the session, but the market
was already down on expectations the data would be bearish.
    "Overall, the outlook doesn't seem to favor the bulls. The
fundamental sugar news 'chatter' still seems to be on an
improved Brazil output," said Thomas Kujawa at brokerage Sucden
    Cocoa futures fell on heavy volume, though industry buying
limited further moves to the downside, dealers said.
    ICE March cocoa closed down $59, or 2.5 percent, at
$2,340 per tonne, the second position's lowest settlement since
July 26. The contract extended its losses after falling through
its 200-day moving average at $2,361 and sell stops.
    U.S. wheat futures rose for a fourth straight session,
rallying above $9 a bushel to a near six-week high, as traders
staked out positions ahead of a monthly U.S. government report
expected to show tightening global supplies.
    Expectations of smaller wheat crops in places like Argentina
and Australia, coupled with dry conditions in the U.S. Plains
breadbasket, buoyed a commodity that has been stuck in a narrow
trading range for months.
    Wheat bulls hoped that problems with the crop overseas could
boost demand for U.S. exports.
    "People should be buying it," said Jerry Gidel, an analyst
at Rice Dairy. "It is a bargain here. The world's normal
exporters ... do not have a lot of excess supplies."      
 Prices at 2:44 p.m. CST (2044 GMT)      
                             LAST/      NET    PCT     YTD
                             CLOSE      CHG    CHG     CHG
 US crude                    84.99     0.55   0.7%  -14.0%
 Brent crude                107.00     0.18   0.2%   -0.4%
 Natural gas                 3.608    0.030   0.8%   20.7%
 US gold                   1726.00    12.00   0.7%   10.2%
 Gold                      1733.21    16.90   1.0%   10.8%
 US Copper                  346.95     2.80   0.8%    1.0%
 LME Copper                7630.15    25.15   0.3%    0.4%
 Dollar                     80.826    0.067   0.1%    0.8%
 US corn                    741.25    -3.00  -0.4%   14.7%
 US soybeans               1495.75   -11.25  -0.8%   24.8%
 US wheat                   902.50     8.50   1.0%   38.3%
 US Coffee                  151.40     0.20   0.1%  -33.7%
 US Cocoa                  2337.00   -62.00  -2.6%   10.8%
 US Sugar                    18.84    -0.11  -0.6%  -18.9%
 US silver                  32.240    0.579   1.8%   15.5%
 US platinum               1540.50     3.00   0.2%    9.7%
 US palladium               614.35     4.00   0.7%   -6.4%
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