COMMODITIES-Mostly down; index reweighting starts with limited impact

Wed Jan 8, 2014 9:48pm GMT

* 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)
    By Barani Krishnan
    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)
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