COMMODITIES-Gold snaps 2-day rally; oil extends losses
* Gold falls 1 pct on U.S. stimulus, sequester worries
* Oil down as stockpiles of US crude, gasoline rise
* Sugar rebounds from 2-1/2 year low, soy up too
* Cotton sees biggest one-day gain in 6 months
NEW YORK, Feb 27 (Reuters) - Gold snapped a two-day rally on Wednesday as the Federal Reserve chairman gave no hints of new U.S. economic stimulus and investors worried that deep government spending cuts were in store for the world's No. 1 economy, and oil fell too on concerns about weakening demand. Copper held steady as the dollar posted its largest loss in a month against the euro, raising buying potential in the base metal among those holding the single European currency.
Raw sugar ended higher after hitting 2-1/2 year lows during the session. U.S. soybean futures rose too as delays in getting to port recently harvested crops in Brazil bolstered export demand for U.S. soy. The Thomson Reuters-Jefferies CRB index settled slightly lower on the day, losses limited by the higher close in six of the 19 commodities on the index. Cotton led gains, rising over 3 percent, or its most in six months, as mill buying helped the market recover ground lost since a 9-month high last week.
GOLD SLUMPS AS DEFLATION WORRIES RETURN Gold fell 1 percent, nearly erasing all of the previous session's gains, hit by disappointment over a lack of new Federal Reserve stimulus and deflation worries over across-the-board deep U.S. spending cuts. A rally in U.S. equities also weighed on gold's safe-haven appeal, as bullion snapped a four-session winning streak a day after Fed Chairman Ben Bernanke defended the central bank's bond-buying stimulus policy. On Wednesday, Bernanke said the U.S. jobless rate is unlikely to reach more normal levels for several years, but there were few surprises in his second day of testimony to the Congress. Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC, said that the central bank's policy of bond buying known as quantitative easing "is becoming less and less effective as Bernanke announced nothing new." That brings the deflationary aspect of budget cuts known as sequestration back to the forefront, McGee said. It is unlikely that Congress will act to stop the $85 billion in across-the-board cuts due to start Friday. The cuts, mandated by a 2011 deficit reduction law, dent gold's inflation-hedge appeal. The spot price of bullion was down to $1,597.21 an ounce by 5:20 p.m. EST (2220 GMT), off a 1-1/2-week high of $1,619.66 set on Tuesday. U.S. gold futures for April delivery were down $19.80 to $1,595.70, with trading volume in line with their 250-day average, preliminary Reuters data showed.
RISING U.S. CRUDE SUPPLY SINKS OIL FUTURES In oil, London's benchmark Brent crude fell to a four-week low beneath $112 a barrel as the sixth straight weekly rise in U.S. crude oil stockpiles and a sharp slide in gasoline prices added to concerns about faltering demand. Inventories of crude oil in the United States rose by 1.1 million barrels in the week to Feb. 22, the Energy Information Administration said in its weekly report. Gasoline stocks slipped from high levels around the Gulf Coast refining center but rose on the East Coast. The U.S. gasoline benchmark futures contract led Brent lower, falling by more than 12 cents to settle at $2.8565 a gallon. "Gasoline is coming down tremendously, which is going to have an impact on refinery runs in Europe," said Dominick Chirichella, senior partner at Energy Management Institute in New York. "(That) suggests a bearish tone on crude oil demand going forward." Brent shed 84 cents to settle at $111.87 a barrel, hitting a low of $111.65, its weakest since Jan. 22.
Prices at 5:25 p.m. EST (2225 GMT)
LAST/ NET PCT YTD CLOSE CHG CHG CHG US crude 92.85 0.22 0.2% 1.1% Brent crude 111.85 -0.86 -0.8% 0.7% Natural gas 3.434 -0.022 -0.6% 2.5%US gold 1615.20 0.00 0.0% -3.6% Gold 1596.15 -1.06 -0.1% -4.7% US Copper 354.50 -2.15 -0.6% -2.9% LME Copper 7870.00 11.50 0.1% -0.8% Dollar 81.568 -0.302 -0.4% 6.3%US corn 709.50 4.50 0.6% 1.6% US soybeans 1457.50 9.75 0.7% 2.7% US wheat 704.25 -1.50 -0.2% -9.5%US Coffee 142.40 -0.50 -0.3% -1.0% US Cocoa 2142.00 16.00 0.8% -4.2% US Sugar 17.84 0.05 0.3% -8.6%US silver 28.943 -0.317 -1.1% -4.2% US platinum 1600.10 -16.40 -1.0% 4.0% US palladium 743.15 3.75 0.5% 5.7%