NEW YORK: Copper closed a touch lower on Monday on concerns the United States may scale back its monetary stimulus program, and oil prices fell after initially rising on fears of a superpower standoff over Syria and possible disruptions to Middle East crude supplies.
Gold joined the slide as a rally in Wall Street stocks pulled investors away from safe-haven assets.
Investors focused mostly on the US Federal Reserve's two-day meeting, beginning Tuesday, which they hoped would provide clarity to the central bank's near-term policy on monetary stimulus.
The Fed's three quantitative easing programs, launched in response to the financial crisis, have been responsible for many of the price gains in gold and other commodities. The central bank is under pressure to roll back some of the $85 billion in monthly bond purchases under its latest program, after some advances in the US economy.
Data on Monday showed growth in New York state's manufacturing sector picked up in June. Sentiment among US homebuilders, meanwhile, surged to the highest level in seven years, pushing the dollar higher and hurting commodities denominated in the currency.
In crop markets, cocoa prices sank for their sharpest three-session drop in more than a year. But corn ended up, gaining 2 percent on tight inventories.
Natural gas also bucked the broadly lower trend in the commodities complex, rallying almost 4 percent as hotter weather forecasts in the US Northeast and Midwest implied more demand for gas-driven power to fuel air conditioning.
The gains on those few commodities helped the 19-commodity Thomson Reuters-Jefferies CRB index finish flat on the day.
FOCUS ON FED
Analysts said they expected thin, nervous trading across the markets until Wednesday's policy statement by the Fed. Fed Chairman Ben Bernanke, in recent congressional testimony, alluded to the "next few meetings" as being the time when the Fed might act if it were to make changes to its monetary easing policy.
"It remains to be seen how the various markets are going to react to the policy statement and Bernanke's news conference. There is a good chance that neither one will get the balance right with respect to investor expectations," said Edward Meir, base metals analyst at INTL FC Stone.
LARGER SUPPLY ALSO WEIGHS ON COPPER
Copper's benchmark three-month futures contract on the London Metal Exchange closed at $7,082 a tonne versus Friday's $7,085.
Copper initially rose as much as 1 percent before data showing a jump of more than 11,000 tonnes in LME-linked warehouse supplies weighed on the market.
News that India's top copper smelter had reopened on Sunday, after complaints from residents had forced a two-month shutdown, helped underpin the price drop.
OIL MARKETS WATCH SYRIA
Oil's benchmark Brent crude out of Europe's North Sea closed down 46 cents at $105.47 a barrel.
New York-traded US crude finished down 8 cents at $97.77.
Aside from the Fed, investors in oil will be watching developments this week in Syria, including Monday's talks between US President Barack Obama and Russia's Vladimir Putin that were aimed at ending a two-year civil war in that country. Putin said he and Obama had differences in opinion over Syria but that both of them wanted the violence there to end.
Syria is not key to global oil supply, but investors are worried the civil war there could drag into other nations and plunge the whole Middle East region into conflict.
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