NEW YORK Oil and gold ended lower on Thursday, as investors took some profits off recent highs, following news that Libyan leader Muammar Gaddafi accepted a plan to end uprising in the OPEC nation, but skepticism about the deal's success kept prices firmly underpinned.
Oil prices fell from levels near 2-1/2 year highs, on the profit-taking spree when Venezuelan President Hugo Chavez proposed to resolve Libya's political crisis.
But few traders expect any quick resolution to the violence that has halved Libyan oil output and sparked concerns over unrest spreading to other Middle Eastern oil producers.
Despite declines in oil and precious metal prices, the Reuters Jeffries CRB index .CRB of 19 commodities rose 0.4 percent on strength in cocoa, grains and metals.
(Graphic on year-to-date performance of CRB components: link.reuters.com/kew48n )
U.S. crude futures edged lower after a Venezuela pitched its plan to resolving Libya's upheaval, although many players remain highly skeptical about whether such a plan could work.
Saif al Islam, Gaddafi's son, said there was no need for any foreign role in ending Libya's crisis, when asked about Venezuela's mediation offer.
And, analysts doubt Chavez can bring any immediate end to fighting in Libya, where Gaddafi faces an increasingly organized rebel army.
"I am highly skeptical the market is coming off on assumptions that Chavez will successfully mediate in Libya," said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania. "I think the market was overbought."
Thomas Helbling, advisor in the IMF's Research Department, told Reuters Insider television, "We're looking at a relatively mild oil supply shock with prices $10 to $15 (a barrel) higher. We expect this will be the outcome for the year."
RETREAT FROM HIGHS
A day after rallying to record highs, gold prices also retreated, falling 1.5 percent on news of Venezuela's proposal to end Libya's turmoil, and as the European Central Bank warned it could soon raise interest rates.
ECB President Jean-Claude Trichet's said the central bank would exercise "strong vigilance" over inflation and interest rate hikes could come at ECB's April meeting.
"You have the European talk about higher interest rates down the road and a stalling crude rally, which are weighing on the (gold) market now," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.
On Wednesday, gold prices set a record at $1,440.10 per ounce, and silver climbed to peaks last seen in early 1980, then slid off those highs as investors unwound risk plays.
Industrial metals were firmer, lifted by a retreat in oil prices as the prospect of inflation leading to higher interest rates was eased.
London Metal Exchange (LME) three-month copper settled up $26 at $9,915 per tonne, still below the $9,979 per tonne all-time high reached in mid-February.
CROP PRICES GAIN
Among other commodities, ICE cocoa hit a fresh 32-year peak of $3,760 a tonne as fighting spread in top producer Ivory Coast.
Explosions rocked a southern Abidjan suburb overnight, as fighting spread to new areas of the main city between insurgents seeking to oust Ivory Coast's Laurent Gbagbo and security forces.
Gbagbo's security forces shot dead at least six women who were protesting in support of presidential claimant Alassane Ouattara, several witnesses said.
"If this becomes more protracted, then the problems really start," a London-based broker said, adding that Ivory Coast's 2011-12 main crop is likely to be down on the previous year.
U.S. corn futures rallied as weekly U.S. export sales topped 1 million tonnes for a fifth straight week, and prices headed toward a 32-month high set in the previous session.
Wheat rose with corn, aided by a drop in the dollar and ideas the market was undersold relative to other grains.
Soybeans rose on export demand and worries that labor disputes at a key port in world's No. 3 soy supplier, Argentina, could divert demand to the United States.
(Additional reporting by Jan Harvey in London and Lesley Wroughton in Washington; Editing by Marguerita Choy)