COMMODITIES-Mostly down; index reweighting starts with limited impact

Barani Krishnan
Wednesday, 8 Jan 2014 | 4:48 PM ET

* Dollar, jobs data and Fed mute impact to rebalancing

* Gold, oil and natgas fall; arabica coffee rallies

(Updates with market activity and price action from session) NEW YORK, Jan 8 (Reuters) - Gold, oil and natural gas prices fell on Wednesday as the annual shifting of billions of dollars in commodity index funds appeared to have a limited impact on prices. U.S. crude oil prices fell sharply due to an over 1-million-barrel build at the key delivery hub for the futures contract, while Brent crude ended little changed on support from Libya. The changes also echoed shifts in the most widely-followed commodity indices expected to allocate $2.7 billion to Brent and cut as much as $2.8 billion from West Texas Intermediate (WTI) crude. But gold futures, which were due to see an inflow of $1.1 billion thanks to their higher weighting, also fell on the day. Upbeat U.S. private-sector jobs data boosted the dollar and sparked speculation of sharper imminent cuts in the Federal Reserve's stimulus, weighing on gold prices. Traders also pulled forward their expectations for a U.S. rate hike after the release of minutes from the Fed's latest policy meeting.

The Standard & Poors Goldman Sachs Commodity Index and the Dow Jones-UBS Commodity Index, two of the world's most popular indices, had raised their allocations to gold by about $1 billion under a rebalancing exercise beginning Wednesday and lasting five business days. A spokeswoman for S&P Dow Jones Indices, which runs the SPGSCI and DJ-UBS, said approximately $12.4 billion was expected to be moved around under the rebalancing. "Ideally, the rebalancing should have been the focus in commodities today," said Adam Sarhan, president at New York-based investment advisory Sarhan Capital. "But with the dollar moving up and the jobs numbers and Fed minutes indicating traction in the economy, more variables came into play."

Prices of other commodities from soybeans to wheat and cotton also tumbled on concerns about weaker demand. Arabica coffee was one of the few which bucked the trend, rising 3 percent on short-covering. U.S. crude settled 1.4 percent lower at $92.33 a barrel while Brent crude settled down 0.2 percent at $107.15. Brent, which closed flat in 2013, has a cumulative rise of 1.7 percent in the SPGSCI and DJ-UBS weightings for 2014. Brent prices have fallen 3 percent since the start of this year. U.S. crude, which closed up 7 percent last year, has a 1.8 percent cut in new weightings of the two indexes. Prices have fallen 6 percent this year so far. Gold will see a total rise of 0.7 percent in 2014 weightings that would shift an additional $1.1 billion toward the precious metal. The spot price of gold was at $1,227.36 an ounce by 3:36 p.m. EST (2036 GMT), down 0.3 percent on the day. U.S. gold futures' most-active February contract also fell 0.3 percent, finishing at $1,225.50. Gold had an unbroken 12-year rally, reaching record highs above $1,900 an ounce in 2011, before falling nearly 30 percent in 2013 after the Fed began tightening its long-running stimulus. This year so far, gold has rebounded 1.7 percent. In natural gas, prices fell after forecasts for imminent warmer U.S. weather after this week's icy blast that had descended on two-thirds of the country. The front-month contract for U.S. gas in New York closed down 83 cents, or just under 2 percent, at $4.216 per million British thermal. For natural gas, weightings would fall nearly 1 percent under the index rebalancing, taking an estimated $1.44 billion from the market. Natural gas prices surged 26 percent in 2013, in a rally late in the year driven by bitter cold weather and signs that production may be tapering. Since the start of this year, gas has risen nearly half a percent on extended chilly weather.

Prices at 4:41 p.m. EST (2141 GMT)

LAST/ NET PCT CLOSE CHG CHG US crude 92.55 -1.12 -1.2% Brent crude 107.46 0.11 0.1% Natural gas 4.216 -0.083 -1.9% US gold 1225.50 -4.10 -0.3% Gold 1224.95 -6.54 -0.5% US Copper 3.34 -0.02 -0.5% LME Copper 7344.50 -6.50 -0.1% Dollar 81.068 0.235 0.3% CRB 274.856 -1.970 -0.7% US corn 417.00 -9.00 -2.1% US soybeans 1300.75 1.25 0.1% US wheat 588.75 -13.75 -2.3% US Coffee 120.90 3.65 3.1% US Cocoa 2700.00 25.00 0.9% US Sugar 15.74 -0.32 -2.0% US silver 19.539 19.341 1.6% US platinum 1412.20 -0.50 0.0% US palladium 738.30 -3.40 -0.5%

(Editing by Marguerita Choy)