COMMODITIES-CRB index hits 21-month high as oil, gold rally for week
* Iraq violence drives Brent, U.S. crude prices up 2nd week
* Fed's inflation comfort lifts gold to best week in 4 mths
* CRB index hits Sept 2013 highs, up 12 pct so far on yr (Recasts; adds copper and zinc prices in last paragraph)
By Barani Krishnan
NEW YORK, June 20 (Reuters) - Oil and gold rose for a second week and a key commodities index hit 21-month highs on Friday as violence in Iraq fueled oil supply worries and investors bought bullion on the notion an interest-rate hike from the U.S. Federal Reserve was a long way off.
Even though bullion and Brent crude prices dipped on Friday, the weekly rally boosted oil and gold prices out of the range-bound trend they had seen for nearly a month. Analysts expected commodities to start stronger in the second half.
"Escalated geopolitical tensions and inflation concerns are providing new excitement so to speak in commodities," said Adam Sarhan at New York's Sarhan Capital. "If the Middle East tensions get beyond the tipping point, you could see a massive premium come in to the oil market."
The run-up in oil particularly lifted the 19-commodity Thomson Reuters/Core Commodity CRB Index, which hit its highest levels since September 2012. With nearly a quarter of its weighting made up of crude oil, the CRB index ended up 0.4 percent for the session and 1 percent on the week, while heading for a near 12 percent gain on the year.
Both benchmark Brent and U.S. crude prices ended up for a second straight week as Iraqi government-led forces were concentrated north of Baghdad to strike back at Sunni Islamists headed toward the capital.
"The events unfolding in Iraq will continue to dictate the direction on the market and support the oil price for the time being at a high level," said Barbara Lambrecht, analyst at Commerzbank in Frankfurt.
Brent settled at $114.81 a barrel, up 1.2 percent on the week, but down 0.3 percent on the day after some profit-taking. U.S. crude finished at $107.26, up 0.3 percent on the week and 0.8 percent higher on the session.
Gold scored its biggest weekly gain in four months, helped by safe-haven buying related to the Iraq conflict and a softer dollar after the U.S. central bank's comments on inflation.
On Wednesday, the Fed sounded comfortable about the inflation outlook despite recent signs of a pick-up in price pressure. That dashed some expectations the U.S. central bank might have to start lifting interest rates earlier than expected, driving the dollar down and gold up.
The spot price of gold held above $1,314 an ounce by 5:00 p.m. EDT (2100 GMT), showing a 3 percent gain on the week and a 0.4 percent decline for the session.
Base metals were among other strong gainers in commodities on Friday. Copper ended up 2.5 percent on the week at$6,820 a tonne, its biggest weekly gain since March after a six-day rally. Zinc hit 16-month highs of $2,182. (Editing by Bernadette Baum and David Gregorio)