COMMODITIES-Gold nears $1,000; dollar hurts most other commods

* Gold breaches $980/oz in race towards $1,000

* Dollar continues to climb, hurting most commodity prices

(Recasts and updates with U.S. markets activity; changes
dateline to NEW YORK, previous LONDON)

By Barani Krishnan

NEW YORK, Feb 18 (Reuters) - Gold edged closer to $1,000 an
ounce on Wednesday, appealing to more people as a store of
value, while other commodities from oil to grains were
pressured by a weak economy and strong dollar.

"We believe this is purely a flight to safety, with people
desperate to put their money somewhere they can get liquidity
and get their money back," said Daniel Smith, analyst at
London's Standard Chartered, referring to gold.

The Reuters-Jefferies CRB index .CRB, a broad commodities
gauge, was down 1.4 percent as markets outside of gold like
oil, soybeans and cocoa extended Tuesday's sell-off. Copper,
the main industrial metal, rose 1 percent in U.S. trade but
aluminium slumped to six-year lows in London. [MET/L]

The broad weakness in commodities was due partly to the
resilience of the dollar, which made raw materials priced in
the greenback costlier to hold.

The dollar neared a three-month peak against the euro on
worries about the exposure of eurozone banks to the struggling
East European economies and hit six-week highs against the yen
on concerns about the ailing Japanese economy. [USD/]

Analysts said Ben Bernanke, chairman of the U.S. Federal
Reserve, also underlined investors concerns about the economy
by saying the United States was unlikely to see a turnaround
this year, although the economy should perform beyond the Fed's
normal three-year forecast horizon. [ID:nN18497644]

Although inflation appeared tame, the potential for
currency devaluation was overwhelming, given the staggering
volumes of money being printed now to fight the recession,
analysts said.

"Seeing gold rally in parallel with a strengthening
greenback is not only unusual, but speaks volumes about how
unnerved the markets are by the inflationary potential of the
massive amounts of liquidity currently being generated," said
Edward Meir, analyst at New York's MF Global.

Benchmark U.S. gold for April delivery GCJ9 breached the
$980 an ounce level to hit seven-month highs for a second
straight session, nearing the record high of $1,034.30 set for
a third month contract in gold futures. April gold settled at
$978.30, up $10.80 or 1.1 percent from Tuesday. [GOL/]

Trade in physical gold bullion reached a session high of
$984.65, against the $968.40 level in New York late Tuesday.

U.S. crude CLc1 closed down 31 cents, or nearly 1
percent, at $34.62 a barrel as investors feared a big build in
oil inventories in data due later on Wednesday and Thursday.

Crude oil prices had hit record highs above $147 a barrel
in July, before the global economic downturn and concerns about
energy demand brought the market down to as low as $32 in
December and January. [O/R]

On the agricultural front, U.S. soybeans for March delivery
SH9 settled down 15-1/2 cents at $8.87-1/2 per bushel,
weighed down by economic concerns and improving crop conditions
in major producing nation Argentina. [GRA/]
(Reporting by Barani Krishnan; Editing by Marguerita Choy)