* U.S. rate hikes haunt commodity markets
* Flight to safety weighs on sentiment
LONDON, Dec 10 (Reuters) - Gold came under selling pressure on Thursday as the dollar held firm, while fears of another bout of financial turbulence and economic uncertainty also prompted a retreat from oil and copper.
Industrial metal copper fell to two-week lows of $6,810 a tonne, gold slipped to $1,121.30 a troy ounce -- near this week's low of $1,116.80. Crude oil slid to $70.44 a barrel, near two-month lows hit on Wednesday.
Bucking the trend however, was cocoa, which rose to 25-year highs on growing talk of a substantial deficit in 2009/10.
The dollar's .DXY rise in recent days was triggered by a monthly jobs report from the United States, showing employers cut far fewer jobs than expected in November. [ID:nN04320079]
The number is notoriously volatile and subject to large revisions, but speculation that economic recovery in the United States, the world's largest economy, may be stronger than thought has raised the spectre of a rate hike.
"There are two opposing forces for the outlook in commodities markets. One is that demand might be higher than people were thinking," said Andrew Cole, director of asset allocation at Baring Asset Management.
"On the other hand dollar appreciation means commodity prices may no longer go up in dollar terms."
Talk of Dubai default and a credit downgrade for Greece have raised the idea of another financial storm, like the one seen last year and early this year. [ID:nGEE5B725I] [ID:nGEE5B90AC]
"Indirectly there are some safety issues here for investors. If they buy U.S. Treasury bonds, they need dollars," a Europe-based fund manager said. "Some of the losses in commodity and equity markets can be laid at this door."
TOO MUCH CRUDE
Crude oil CLc1 was at $71.00 a barrel at 1311 GMT, down about $8 since December 1. It fell more than 2 percent on Wednesday after inventory data highlighted weak oil demand in the United States, the world's largest consumer. [O/R]
The U.S. Energy Information Administration data showed builds in U.S. refined product stocks, although there was a surprise draw in crude oil inventories. [ID:nN09148558]
"Crude is an oversupplied market at the moment," said Michael Lewis, head of commodities research at Deutsche Bank.
"The dollar story is going to be a challenge for gold going into next year ... anticipation of a U.S. rate hike."
Gold among all commodities is said to have the strongest relationship with the dollar. [GOL/]
Spot gold XAU= was bid at $1,124.10 an ounce compared with $1,122.85 late in New York on Wednesday when it fell to $1,116.80, its weakest since November 13.
For graphic on the relative performance of gold, oil and the dollar click here$OIL1109.gif
Copper MCU3 was at $6,840 a tonne on the London Metal Exchange from $6,945 on Wednesday. [MET/L]
Prices of the metal used in power and construction have slipped as the market has in recent weeks focused on rising stocks in LME warehouse, which at 461,625 tonnes are up nearly 80 percent from early July.
Negative sentiment in industrial metals markets was offset by news that China's industrial output rose by more than 16 percent in November from a year earlier. [ID:nBJA002208]
China is the world's largest consumer of industrial metals.
"It confirms what officials have been saying that China is undergoing a V-shaped recovery and underlines their voracious appetite for raw materials," said Calyon analyst Robin Bhar.
March cocoa LCCc2 rose one pound to 2,268 pounds a tonne after earlier touching 2,270 pounds, the highest level for the benchmark second month in 25 years, according to Reuters data.
An early start of the harmattan, dry desert winds that can reduce mid-crop prospects in top producer Ivory Coast, have helped to raise expectations about the size of the shortfall.