COMMODITIES-Oil, copper, gold retreat as dollar rises

By Russell Blinch

SINGAPORE, Oct 9 (Reuters) - Oil, gold and copper retreated in the face of a resurgent dollar on Tuesday, extending a decline on commodities that took hold the previous day.

After a 3 percent fall on Monday, U.S. crude weakened further to under $79 barrel, while copper dropped $21 to $7,935 a tonne, also after a 3 percent fall the previous session.

Gold's slide has been more gentle but bullion eased again to $730.30/$730.80, from $732.80/$733.60 late in New York.

Analysts blamed the resurgent dollar for the widespread weakness in the commodities complex where wheat and other farm products -- except for coffee -- were also casualties. The U.S. dollar was pummeled against a basket of currencies in September after the Federal Reserve cut interest rates to shore up support in the face of a growing credit crunch. But on Friday some confidence was restored after the U.S. employment report showed a strong gain of 110,000 jobs.

"What to do with commodities? Sell! There has been a significant downside adjustment and I think they have farther to go," said Jonathan Barratt, managing director of Australia's Commodity Broking Services.

"The hedge funds have huge positions and a strengthening in the dollar will trigger them to get out of these plays. Copper has failed to hold support, and wheat is about to fail. The technical picture for oil is quite smelly too."

The dollar edged higher against the euro on Tuesday but fell against the yen, as not all investors believe the employment report means the U.S. economy is out of harm's way.

"Even though the September jobs data was stronger than expected, that data alone did not completely wipe out the possibility of a Fed interest rate cut in October," said Tsutomu Soma, a senior manager of foreign securities at Okasan Securities.