COMMODITIES-Oil tumbles on Europe recession fears; gold up

* U.S. crude oil down 4 pct, sharpest drop since June
* Copper falls for first time in 5 sessions
* Arabica coffee, raw sugar join slide as dollar rises
* Gold stays near 11-month highs on safe-haven demand

By Barani Krishnan
NEW YORK, Oct 3 (Reuters) - Oil prices tumbled on Monday,
with U.S. crude posting its largest drop in four months, after
European economic data pointed to a recession that could further
hurt global demand for raw materials.
Copper, arabica coffee and raw sugar -- markets that had
risen in the past two sessions -- joined the sell-off after a
rally in the dollar made dollar-denominated commodities costlier
for holders of the euro and other currencies. [S OF/L]
Data out of China indicated a seventh quarter of economic
slowdown in the world's No. 2 economy, adding to the pressure.
Gold stayed near this week's 11-month high, as more
investors turned to the precious metal viewed as a safe haven in
times of economic and political trouble. [ GOL/]
"Gold has certainly got a bit of spring in its step at the
end of the summer break," said Ross Norman, chief executive at
gold-broking firm Sharps Pixley. "There is good physical buying
coming through and central bank buying is firm so the market
will support it."
Futures of grain such as soybeans, wheat and corn also
posted small gains, rebounding from early weakness.
"We were getting into some technically oversold territory
and to see a spike in the buying activity is not uncommon," said
Karl Setzer, a commodity trading adviser at MaxYield Cooperative
in West Bend, Iowa, who follows the grain markets. [G RA/]
The Thomson Reuters-Jefferies CRB index settled
down 1.6 percent, its sharpest percentage decline since Sept.
18. Twelve of the 19 markets tracked by the CRB were down. The
gainers were led by nickel <C MNI3>, w hich rose 1.3 percent.

OIL DOWN FOR 3RD DAY
Crude oil fell 4 in New York and 3 percent in London as
economic data from Europe and China dimmed the outlook for fuel
demand and heightened concerns about Europe's festering debt
crisis.
Dwindling new orders and faster layoffs marked a worsening
decline for euro zone companies last month, according to
business surveys that dented hopes the economy will return to
growth before 2013.
Purchasing managers indexes (PMIs) for the euro zone
released on Wednesday strongly suggested the region had returned
to recession in the third quarter. [ ID:nL9E8JU004]
Highlighting the impact on oil consumption, retail sales in
the euro zone barely rose in August as European motorists cut
spending on fuel during the normally busy summer driving months.
"There's little to be cheerful about," said Filip Petersson,
analyst at SEB in Stockholm.
China's official PMI for the services sector also fell in
September from August as growth in the manufacturing industry
stabilized at a slower pace.
U.S. crude closed at $88.14 a barrel, down $3.75, or
4 percent -- its sharpest one-day fall since June 21.
London's benchmark Brent crude finished at $108.17,
down $3.40.
Despite having fallen for three straight days, Brent crude
remains about $20 a barrel higher from its lows in June, buoyed
by worries about supplies from the Middle East.
Investors were watching Iran, where riot police clashed with
demonstrators and arrested currency exchange dealers in the
capital Tehran over the collapse of the rial, which has lost a
third of its value against the dollar in a week, witnesses said.

Markets also kept a nervous eye on tension between Iran and
the West and Israel over Tehran's nuclear program.
"The situation between Iran and Israel will keep the heat
under the (oil) market until the end of the year," Tony Nunan,
oil risk manager at Mitsubishi Corp in Tokyo, said. [ O/R]

COPPER SNAPS 4-DAY RUN-UP
Copper ended four days of gains although losses in the
industrial metal were limited by better-than-expected private
sector job growth in the United States in September. U.S.
nonfarm payrolls data are due on Friday. [I D:nL1E8L33A5]
Copper has risen 9 percent since the start of September to
touch a 4-1/2-month peak of $8,422 a tonne on the London Metal
Exchange. The rally was fueled by promises of bond-buying by the
U.S. Federal Reserve and European Central Bank and other
stimulus measures in China and Japan.
In Wednesday's session, LME's three-month copper
settled down nearly 1 percent at $8,260 a tonne. In New York,
copper futures for December delivery < HGZ2> f inished down nearly
half a percent at $3.7840 a lb. [M ET/L]

Prices at 3:21 p.m. EDT (1920 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US crude 87.91 -3.97 -4.3% -11.0%
Brent crude 107.82 -3.75 -3.4% 0.4%
Natural gas 3.395 -0.136 -3.9% 13.6%

US gold 1779.80 4.20 0.2% 13.6%
Gold 1777.30 3.16 0.2% 13.7%
US Copper 378.40 -1.70 -0.4% 10.1%
LME Copper 8290.00 -35.50 -0.4% 9.1%
Dollar 79.954 0.210 0.3% -0.3%

US corn 757.50 -2.25 -0.3% 17.2%
US soybeans 1532.25 -1.00 -0.1% 27.8%
US wheat 884.00 1.00 0.1% 35.4%

US Coffee 181.05 -2.60 -1.4% -20.7%
US Cocoa 2416.00 -59.00 -2.4% 14.6%
US Sugar 21.58 -0.01 0.0% -7.1%

US silver 34.690 0.021 0.1% 24.3%
US platinum 1692.10 6.90 0.4% 20.4%
US palladium 657.90 3.70 0.6% 0.3%