COMMODITIES-Prices tumble after talk of hedge fund in trouble

Wed Feb 20, 2013 1:20pm EST

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(Writes through with possible hedge fund liquidation and other
details, quotes; adds NEW YORK to dateline, second byline)
    * Rumor of commodity fund liquidation sparks broad selloff
    * Gold at 6-month low, silver down most in 2 months
    * Copper hits 1-month bottom
    * Gasoline, US crude oil down more than 2 pct each

    By Eric Onstad and Barani Krishnan
    LONDON/NEW YORK, Feb 20 (Reuters) - Commodities tumbled on
Wednesday after talk of a hedge fund in trouble and worries over
global supply and demand prompted widespread selling in metals
and oil.
    Jitters about minutes from a U.S. Federal Reserve meeting in
January, due to be released later on Wednesday, added to the
pressure.
    Gold slid to the lowest levels in six months, silver had its
sharpest decline in two months and benchmark industrial metal
copper fell to a one-month low.
    In oil, U.S. crude shed more than $2 a barrel.
    "There are rumours that a large commodity hedge fund blew up
and was forced to dump its holdings, sparking a selloff across
markets," said Adam Sarhan, chief executive at Sarhan Capital in
New York, which invests in gold and other commodities.
    The stock market also slid, with U.S. energy stocks
particularly falling on talk that that a troubled hedge fund was
selling assets. 
    "I heard the chatter about a hedge fund liquidating things
today but how big, I don't know. Certainly it sparks concern,"
said Michael James, senior trader at Wedbush Morgan in Los
Angeles 
    The Thomson Reuters-Jefferies CRB index, a
commodities bellwether, was on track to its sharpest loss in two
months, sliding 0.7 percent by 12:30 p.m. EST (1730 GMT).
    Twelve of the 19 markets tracked by the CRB were down, with
silver, gasoline and crude oil all falling more than 2 percent
each. Reuters data showed the selloff accelerating between 10:00
and 11:00 a.m. as news of a fund in trouble gathered pace.
    
    SOME MARKETS DOWN IN HEAVY VOLUME; SILVER LEADS
    Volume in silver was almost double the 30-day average. March
, the most-active silver contract on New York's COMEX,
slumped 2.8 percent for its sharpest decline since Dec. 20.
    Trading in London's Brent crude oil was nearly 30
percent above the 30-day norm. Brent fell below $116 a barrel,
down $1.70, on prospects of more Saudi supply that offset
confidence that there will be more demand from an improving
global economy.
     U.S. crude CLc1 was at $94.65 a barrel, down $2.03. 
    The spot price of gold fell to six-month lows,
breaking through support at $1,600 an ounce, as investors were
drawn to riskier assets. 
    Copper's benchmark three-month contract in London 
slipped to their lowest in more than a month, dragged down by
persistent demand concerns as post-holiday buying from top
consumer China remained subdued. 
    On the agricultural side, sugar raw prices near a 2-1/2 year
low. 
    
    JANUARY RALLY HAVE GOTTEN AHEAD OF DEMAND
    Some analysts said an early rally in commodities this year
on upbeat economic data from the United States and China may
have got ahead of actual improvement in underlying demand.
    The CRB rose 4.3 percent during January. But it has eased
back during most of February, and has shaved its yearly gain to
only 0.5 percent.
    "We're entering the demand destruction price zone - when you
start to have some fears about global demand," Olivier Jakob at
Petromatrix said, referring to oil prices.
    "It's really a price level when you need to take into
account the risk that demand could take a hit."
    A mixed reading of U.S. housing data added to concerns about
whether recent improvements in economic figures would continue.
    
 Prices at 12:58 p.m. EST (1758 GMT)                      
 
                              LAST      NET    PCT     YTD
                                        CHG    CHG     CHG
 US crude                    94.40    -2.26  -2.3%    2.8%
 Brent crude                115.66    -1.86  -1.6%    4.1%
 Natural gas                 3.285    0.013   0.4%   -2.0%
 
 US gold                   1579.40   -24.80  -1.6%   -5.8%
 Gold                      1579.56   -24.65  -1.5%   -5.7%
 US Copper                  360.65    -4.30  -1.2%   -1.3%
 LME Copper                7960.00   -90.00  -1.1%    0.4%
 Dollar                     80.778    0.310   0.4%    5.2%
 
 
 US corn                    697.00     1.75   0.3%   -0.2%
 US soybeans               1484.00    13.75   0.9%    4.6%
 US wheat                   737.00     4.75   0.7%   -5.3%
 
 US Coffee                  141.15     4.65   3.4%   -1.8%
 US Cocoa                  2099.00   -30.00  -1.4%   -6.1%
 US Sugar                    18.39     0.17   0.9%   -5.7%
 
 US silver                  28.620   -0.802  -2.7%   -5.3%
 US platinum               1649.50   -48.00  -2.8%    7.2%
 US palladium               736.65   -27.50  -3.6%    4.7%
 
 (Editing by Anthony Barker and Andrew Hay)
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