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COMMODITIES-Oil, gold sinks as dollar firms after shock ECB rate cut

Marina Lopes
Thursday, 7 Nov 2013 | 6:22 PM ET

* Brent crude falls to lowest since Jul. 2

* Coffee jumps after sliding to 7-year low

* Strong dollar pressures gold to 3-week lows

NEW YORK, Nov 7 (Reuters) - Oil and precious metals fell on Thursday, with Brent crude sliding to a four-month low while gold sank to its lowest since mid-October as a strong dollar pressured prices. Coffee rose, with arabica futures up almost 4 percent, as technical buying on the eve of the December contract expiration rescued prices from a seven-year low. The Thomson Reuters/Core Commodity CRB index settled down 0.28 percent, with 12 out of the 19 commodities it tracks in negative territory. A surprise decision by the European Central Bank to cut interest rates sent the euro sliding to a seven-week low against the dollar. A stronger dollar makes dollar-denominated crude more expensive for international buyers. Data showing the U.S. economy grew 2.8 percent in the third quarter added further support to the U.S. currency. Friday's much-anticipated jobs data will provide another clue about how long the Federal Reserve will keep buying $85 billion a month in bonds. The central bank's stimulus has supported commodity prices, especially bullion. Comments from Iran's foreign minister raising the possibility of a rapprochement with the United States also pressured oil prices, as did a surge in U.S. crude supplies. "The weak euro and stronger dollar are obviously in play, and it looks like these Iran talks are going to cement a deal," said Phil Flynn, an analyst with the Price Futures Group in Chicago, Illinois." Cocoa was the biggest decliner among commodities tracked by the index, with prices down almost 2 percent as speculative selling all but reversed the previous session's spike. U.S. stocks fell, as lackluster earnings from Whole Foods and Qualcomm hurt the broader market.

OIL SLIPS ON STRONG DOLLAR Brent crude oil futures slid nearly 2 percent, declining for a third straight day. Its premium over West Texas Intermediate, the U.S. oil benchmark, narrowed by more than $1, in what analysts said could also be a currency play. "You might see Brent drop quicker and further because Brent is generally traded in euros, and they have an easy money policy," said Rich Ilczyszyn, chief market strategist at iitrader.com in Chicago. Iran and six world powers are making progress in talks aimed at ending a decade-long nuclear stand-off between Tehran and the West, but the discussions are "tough," Iran's foreign minister said on Thursday. Sanctions against Iran have kept some one million barrels of oil off the market and have slashed Iran's oil revenues by 60 percent. Excess physical supply is now manifesting in the futures market, with the December Brent contract trading at a discount to the January contract.

GOLD DROPS ON STRONG DOLLAR Gold fell to a three-week low, reversing early gains to end down nearly 1 percent on signs of strong U.S. economic growth and after the ECB's shock interest rate cut. A flurry of sell orders shortly after the GDP data briefly hammered prices, sending them below $1,300 an ounce and setting the tone for the rest of the day. "When the stocks are rallying, investors have little reasons to head to safe havens and physical assets like gold, as they can go into the stock market and do well there," said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge.

COFFEE JUMPS 4 PCT IN BOUNCE OFF 7-YEAR LOWS Coffee futures jumped 4 percent after sliding early to seven-year lows on concern about bumper crops in top producer Brazil. The sharp rebound came in a turbulent session on technical buying and bargain hunting. Cocoa sank, nearly reversing Tuesday's gains, as an options expiration led to speculative selling, while sugar edged down. Relentless selling had pushed arabica prices to $1.0095 per lb, their weakest since October 2006, and near the psychologically key $1 mark. That sparked a flurry of technical buying that put the front month on track for its strongest one-day performance in two months. "You're seeing a lot of bears take back, not because of any news but because they went for a buck and it got close. That was enough," said Jack Scoville, vice president for Price Futures Group in Chicago.

Prices at 5:39 p.m. EDT (2239 GMT)

LAST/ NET PCT YTD CLOSE CHG CHG CHG US crude 94.35 -0.60 -0.6% 2.8% Brent crude 103.36 -1.88 -1.8% -7.0% Natural gas 3.519 0.021 0.6% 5.0% US gold 1308.50 -9.30 -0.7% -21.9% Gold 1307.27 -0.28 0.0% -21.9% US Copper 3.25 0.01 0.4% -11.1% LME Copper 7145.00 30.00 0.4% -9.9% Dollar 80.836 0.352 0.4% 5.3% CRB 273.162 -0.767 -0.3% -7.4% US corn 420.50 -0.75 -0.2% -39.8% US soybeans 1278.75 15.75 1.3% -9.9% US wheat 653.00 -0.25 0.0% -16.1% US Coffee 103.95 2.45 2.4% -27.7% US Cocoa 2676.00 -54.00 -2.0% 19.7% US Sugar 18.04 -0.06 -0.3% -7.5% US silver 21.657 21.439 1.6% -28.4% US platinum 1456.80 -10.60 0.0% -5.3% US palladium 759.15 -5.20 -0.7% 7.9%

(Reporting By Marina Lopes; Editing by David Gregorio)