COMMODITIES-Oil, copper fall after Greek relief rally fades
* Oil, copper fall into red; gold pares loss
* Greece to forge new govt after pro-bailout parties win
* Market optimism fades given other Europe worries (Updates prices, adds quotes)
By Eric Onstad and Manolo Serapio Jr
LONDON/SINGAPORE, June 18 (Reuters) - A rally in commodities faded on Monday after investors began looking beyond the short-term boost from the victory of pro-bailout parties in the Greek election and turned their focus back onto wider problems in the euro zone debt crisis.
Oil, copper and wheat jumped when markets opened in Asia as political parties supporting debt-stricken Greece's bailout won Sunday's election, briefly fuelling appetite for riskier assets.
But the warm sentiment failed to last as crude oil and copper dipped into negative territory and many other commodities gave up gains.
Gold was already down, snapping a six-day rally, as the Greek election outcome meant less interest from investors looking for a safe haven.
Greece's centre-right New Democracy party will try to form a coalition on Monday with other parties backing the international bailout, but analysts cautioned the optimism and the price gains may be short-lived.
Investors were also concerned whether leaders at a Group of 20 summit will produce a lasting solution to the European debt crisis at a two-day meeting in Mexico.
"The economic outlook is upsetting people more than security issues around Iran, and they realise that nothing really has come out of Greece, except that the crunch may have been delayed for a while," said Roy Jordan, an oil analyst at Facts Global Energy.
OIL GOES INTO RED
Brent crude oil touched a one-week high of $99.50 a barrel in early trade but fell by nearly 1 percent to below $97 by midday in Europe. U.S. oil also fell into the red after hitting a one-week top of $85.60.
Brent futures have dropped by more than 20 percent since April, to trade below $100 a barrel for the first time since early 2011.
"We should see the concerns over Italy and Spain restricting any further upside moves on crude," said Jim Ritterbusch, president of trading consultancy Ritterbusch & Associates in Galena, Illinois.
Oil players are also watching the start of talks in Moscow between world powers and major oil producer Iran on the country's nuclear programme.
The United States, Russia, China, France, Britain and Germany are hoping to win concessions from Tehran and forestall a potential new war in the Middle East that could disrupt oil supplies.
GOLD LOSES SHINE
Spot gold dropped about half a percent to $1,620 an ounce, after falling more than 1 percent earlier as the Greek outcome revived appetite for riskier assets.
Bullion, which often tracks movements in the euro, ignored steep gains in the single currency, but analysts are convinced gold's losses should be curbed, given the shaky global economy.
"The battle has been won, but the war is far from over," Commerzbank analyst Eugen Weinberg said. "That's what the markets seem to be looking at this morning already, with the rally proving to be very short-lived. One would have expected it to last for at least the next couple of days."
This week's U.S. central bank's Federal Open Market Committee (FOMC) meeting, from which investors will be seeking more clues to the chances of a third round of quantitative easing after a recent spate of weak U.S. economic data, will be key for the gold market.
"(We) now expect the FOMC to ease policy further and see a short-term extension of (stimulus programme) Operation Twist as the most likely outcome," Barclays said in a note.
Gold is up around 4 percent so far this month, mainly after rising by around that much on June 1 - its biggest rally in more than three years - when dismal U.S. jobs data fuelled talk of more U.S. monetary easing.
Copper also went into negative territory, dipping below $7,500 a tonne, coming off the session's peak of $7,615, its loftiest since May 30.
Also weighing on copper was data showing average home prices in China's 70 major cities fell for a third straight month on an annual basis since Beijing imposed strict curbs on property speculation more than two years ago.
China is the world's top copper consumer, accounting for 40 percent of global demand.
In a sign that the bears were still lurking, the latest data from the Commodity Futures Trading Commission showed that funds had extended their bearish copper bets last week, turning in their largest net short holding since March 2009.
Grains mostly bucked the weaker trend, clinging to the day's gains, with Chicago July wheat up 1.2 percent at $6.16-1/2 a bushel after rising as high as $6.19-1/2. December corn gained 1.5 percent to $5.13-1/2 after touching a session high of $5.16-1/2.
Coffee and sugar also fell into the red after the wider rally about Greece faded, but cocoa remained slightly firmer. (Additional reporting by Jessica Donati, Jan Harvey, Maytaal Angel, Luke Pachymuthu and Lewa Pardomuan; Editing by Clarence Fernandez and Anthony Barker)