* Oil weakens as hopes for truce between Israel and Hamas
* Gold also falls after firming in early trade
* Grain futures rise on tight supplies, dry U.S. Plains
By Mark Weinraub
CHICAGO, Nov 20 Oil fell more than 2 percent on
Tuesday, retreating from a one-month peak as investors took risk
premium out of the market after a Hamas official announced that
militants from the Gaza Strip and Israel had agreed to a
ceasefire brokered by Egypt.
Gold also fell, erasing early gains after
better-than-expected U.S. housing data, while grains firmed amid
concerns about tight supplies. Corn prices rose for the third
day in a row, hitting their highest level in more than a week.
The Thomson Reuters-Jefferies CRB index, a global
commodities benchmark, dropped 0.6 percent a day after climbing
to its highest level in 3-1/2 weeks.
"Yesterday's big rally was all about fears of a wider
conflict stemming from Israel and Gaza, so when the truce was
announced it's not surprising we've seen prices come right off,"
said Andy Lebow, vice president at Jefferies Bache in New York.
Front-month Brent crude for January delivery dropped
$1.73, or 1.6 percent, to $109.97 a barrel. U.S. January crude
dropped $2.25, or 2.5 percent, to $87.03.
The market was still awaiting confirmation of a truce but
the reduced worry about supply disruptions pressured oil prices,
while the possibility of easing tensions weighed on gold, a
traditional safe-haven investment.
"Geopolitical tensions have always had an impact on gold,"
said Ross Norman, chief executive of precious metals trader
Sharps Pixley, said.
Spot gold fell to $1,726.94 an ounce by 2:23 p.m. CST
(202 3 GMT). U.S. gold fell 0.6 percent to $1,723.20 an
Worries about Europe's economy also pressured prices of oil
and other commodities after ratings agency Moody's stripped
France of its prized triple-A badge, citing uncertainty about
the country's fiscal and economic outlook.
Tight cash markets and technical buying boosted U.S. grain
futures, but gains were limited by a strong U.S. dollar, which
makes U.S. crops more expensive on world markets and lowers
demand from investors seeking a hedge against inflation.
January soybeans at the Chicago Board of Trade gained
1.3 percent to $14.12-3/4 a bushel, December corn added
0.6 percent to $7.43-1/4 and December wheat rose 0.3
percent to $8.45.
Wheat prices received support after the U.S. Agriculture
Department said late on Monday that the condition of the winter
wheat crop fell to 34 percent good to excellent, the lowest
level ever for November.
Little relief was in sight as most of the U.S. Plains were
expected to remain dry for the next two weeks.
"(It is) not very promising," said Don Keeney, meteorologist
with MDA EarthSat Weather. "It does not look like you are going
to get a whole lot of rain for the next 15 days. It is very,
very dry there."
In soft commodities, Arabica coffee notched the biggest
daily decline in four months due to the improving crop outlook
in Brazil. Sugar fell after a sharp rally on Monday.
March sugar dipped on ICE, settling 8 cents lower at
19.86 cents per pound. March white sugar on Liffe
dropped 0.5 percent to $523.60 per tonne.