COMMODITIES-Gold surges to record; dollar's loss is oil's gain

* Gold sets 9th record of Aug, best two weeks since 2008

* Commodities take cues from weak dollar, not weak stocks

* Wheat shoots up, oil next and metals lag
(Adds quotes, updates prices)

By Jonathan Leff and Eric Onstad

NEW YORK/LONDON, Aug 19 (Reuters) - Gold surged to a record
on Friday to seal its biggest two-week gain since 2008 while
oil and copper also rose as a dip in the U.S. dollar offset
another mild bout of investor jitters.

Commodity traders shifted their focus from the sliding U.S.
stock market, which has largely dictated the direction for
prices throughout an exceptionally volatile August, to the
dollar, whose inverse correlation with raw material markets had
waned in recent weeks as markets vacillated.

But the return of the once-popular dollar/commodity trade
may be short-lived as investors refocus on euro zone credit
woes and weak U.S. economic data that has caused gold to rise
more than 12 percent this month while risk assets slump.

"Investors are really worried. Confidence is at its lowest
ebb for some time and the more data disappoints, the more
upside lies ahead for gold," analyst Edel Tully at UBS said in
a note.

The Reuters-Jefferies CRB .CRB, a global benchmark for
commodities, rose 0.9 percent, reversing half the previous
day's losses and ending the week up 0.9 percent -- its biggest
gain in six weeks. Most markets had already settled before the
S&P index .SPX deepened losses to end 1.5 percent lower.

The dollar index .DXY initially fell after Spain said it
would temporarily cut the sales tax on new house purchases in a
move aimed at stimulating the construction sector. The dollar
later hit a record low against the yen on a newspaper report
suggesting Japan did not plan to intervene often. [FRX/]

The rebound in industrial commodities and grains helped
shore up prices after another deep selloff on Thursday, spurred
by data showing factory activity in the U.S. Mid-Atlantic
region fell to the lowest level since March 2009, when the
world's top economy was in recession.

Investors are now looking for any sign of Federal Reserve
action when bankers gather in Jackson Hole, Wyoming, late next
week, one year after Chairman Ben Bernanke launched a second
phase of quantitative easing to revive the economy.

Whether the Fed really has more viable options now, having
already committed last week to keep interest rates at near zero
for the next two years, is an open question.

"We think the markets will be disappointed," Capital
Economics said in a research note. "Bernanke will probably
emphasise that the Fed has the tools to boost the economy if
deemed appropriate. But the big difference between now and last
year is the higher rate of core inflation."

"That means more policy stimulus will probably be a story
for next year, once core inflation has fallen back, not this
year," it added.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Commodity prices since 2008:

link.reuters.com/vam88r

Global agricultural prices since 2008:

link.reuters.com/dab94r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

GOLD LEADS, OTHERS FOLLOW

After rallying around 3 percent to a record $1,877 an ounce
earlier in the session, bullion sharply pared initial gains as
Wall Street held up better than European stocks. Rising oil and
commodity prices also sapped some safety bids.

After touching its ninth record high of August, spot gold
was up 1.2 percent at $1,846.40 an ounce by 3:36 p.m. EDT (1936
GMT). New York gold futures GCv1 rose 1.7 percent to settle
at $1,850.10 an ounce, up 30 percent this year.

ICE Brent crude for October delivery LCOc1 rose $1.63 to
settle at $108.62 a barrel, eking out a 59 cent weekly gain to
snap three straight weeks of losses. U.S. front-month September
crude CLc1 slipped 12 cents to settle at $82.26 a barrel,
blowing out the Brent/WTI spread to a new record. [O/R]

London Metal Exchange (LME) benchmark copper CMCU3 closed
up $51 at $8,825 a tonne, recovering from an earlier slide to
$8,700, its lowest level since Aug. 11.

The industrial metals complex was partly supported by
supply threats in Latin America.

Workers at Chile's Collahuasi, the world's No. 3 copper
mine, have threatened a one-day stoppage on Sept. 2 if the
company does not hire back workers fired after a previous
disruption. [ID:nN1E77G1NQ]

"Setting aside the weak macro environment, copper's
fundamentals remain well-supported. Risks of short-term
disputes and potential supply outages remain," ANZ said in a
note.

U.S. wheat futures rose 3 percent on Friday, rallying on
production worries and a setback in the dollar that also
boosted corn and soybeans. Next week's summer crop tour may set
the tone for another test of recent highs.

"Today is a relief recovery. It's diminished European debt
worry as we close and go into the weekend," said Dan Basse,
president of AgResource Co in Chicago.

Prices at 3:33 p.m. EDT (1933 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG
US crude CLc1 82.63 0.25 0.3% -9.6%
Brent crude LCOc1 109.01 2.02 1.9% 15.1%
Natural gas NGc1 3.940 0.048 1.2% -10.6%
US gold GCZ1 1852.20 30.20 1.7% 30.3%
Gold XAU= 1845.90 22.05 1.2% 30.0%
US Copper HGU1 398.35 1.75 0.4% -10.4%
LME Copper CMCU3 8824.85 54.85 0.6% -8.1%
Dollar .DXY 73.974 -0.270 -0.4% -6.4%
CRB .CRB 329.470 3.050 0.9% -1.0%
US corn Cc1 711.00 12.00 1.7% 13.0%
US soybeans Sc1 1359.75 7.75 0.6% -2.4%
US wheat Wc1 730.75 23.00 3.3% -8.0%
US Coffee KCU1 266.15 1.35 0.5% 10.7%
US Cocoa CCU1 2998.00 13.00 0.4% -1.2%
US Sugar SBV1 30.96 1.84 6.3% -3.6%
US silver SIU1 42.432 1.744 4.3% 37.2%
US platinum PLV1 1874.90 27.20 1.5% 5.4%
US palladium PAU1 748.80 -8.20 -1.1% -6.8%
(Additional reporting by Jan Harvey, Harpreet Bhal, Barbara
Lewis and Naveen Thukral; editing by James Jukwey and Dale
Hudson)