* Copper loses 3 percent on strong inventories
* Oil drops on weak global demand outlook
* Wheat, natural gas higher on market fundamentals
By Jeanine Prezioso
NEW YORK, April 12 Major commodity markets fell sharply on Friday, with oil tumbling to a nine-month low and gold hitting a 20-month low as investors dumped the commodities on worries about a weak global economic outlook and a plan for Cyprus to sell gold reserves.
Spot gold fell more than 4 percent, hitting a session low of $1,493.35 an ounce, the lowest since July 2011.
U.S. gold for June delivery fell to a session low of $1,491.40 an ounce.
Gold entered bear market territory, dipping below $1,500 an ounce, or more than 20 percent from its peak of more than $1,900 an ounce in September 2011.
Cyprus may need to sell gold to raise money to fund a portion of its bailout, the cost of which has grown to 23 billion euros.
"The news on Cyprus' possible gold sale puts the focus back on the fact that many central banks in the developed world have been selling gold in the past few decades and they are still not so keen to hold gold as they used to be," Danske Bank analyst Christin Tuxen said.
The Thomson Reuters-Jefferies CRB index, that tracks 19 commodity markets, was trading 1.2 percent lower at 12:49 p.m. EST (1649 GMT).
Brent May crude oil hit a session low of $101.09, the lowest price since July, on weak U.S. economic data and a key agency report calling for less global oil demand.
U.S. retail sales fell 0.4 percent in March, the U.S. Commerce Department said, contracting for two of the last three months. A day earlier, the International Energy Agency cut its global oil demand growth estimate for this year by 25,000 barrels per day.
"The retail sales data and weakening consumer sentiment on the heels of news Cyprus needs more money, caps a week of news pointing to weaker economic growth and less demand for oil," said John Kilduff, partner at Again Capital LLC in New York.
Three-month copper on the London Metal Exchange closed at $7,406.50, down from Thursday's close of $7,610 a tonne. The metal hit a session low of $7,375 on rising inventories of the red metal and uncertain demand, not far from eight-month lows of $7,331.25 hit on April 4.
Natural gas and agricultural commodities traded higher on fundamental factors from those markets.
New York Mercantile Exchange natural gas futures hit $4.24 per million British thermal units, the highest since July 2011, as late season cold weather tightened the supply-demand balance.
Chicago Board of Trade wheat futures rose 1.9 percent on Friday on healthy export demand, and worries about U.S. crops, while soybeans rose on stronger demand.