COMMODITIES-Funds dump oil, buy gold and wheat: CHICAGO, Feb 2 (Reuters) - Investors bailed out of the U.S. oil market on Thursday, sending prices tumbling as concerns eased over supplies from major producer Iran, while gold hit a new 25-year high on renewed buying by funds and speculators.
Fund buying made for scorching trade in wheat, lifting prices in the Chicago, Kansas City and Minneapolis markets, while copper hit new highs on strong seasonal demand.
Crude oil futures at the New York Mercantile Exchange fell as investors exited long, or bought, positions and grew less worried about international tensions over nuclear activities in Iran, an OPEC member and key global oil supplier.
The United Nations' nuclear watchdog is edging closer to reporting Iran to the U.S. Security Council, but the agency's chief said Tehran did not post "an imminent threat."
"As tough as the talk is, this is a showdown that nobody wants. Both sides are going to end up losers when it comes to oil," said Phil Flynn, an analyst at Chicago's Alaron Trading.
"The market is hopeful that they're going to try to find a way out of it," he said. Oil prices also sagged under a hefty inventory of petroleum in the United States. U.S. Energy Information Administration data showed domestic crude oil stocks rose by a larger-than-expected 1.9 million barrels to 321 million barrels, pushing up the surplus to 32.8 million barrels.
March crude oil fell $1.88 to $64.68 a barrel. March gasoline fell 6.32 cents to $1.6656 per gallon, while March heating oil fell 5.32 cents to $1.7708 a gallon.
Gold futures at the New York Mercantile Exchange rose to a new 25-year high on buying by investment funds and speculators spurred by rising prices for bullion and a weak dollar, which helps to pare the cost of gold in overseas markets.
"It is continuing commodity index-type buying coming in," said Tom Boustead, an analyst with Man Financial in New York.
Fund buying also lifted silver, which held near Tuesday's 22-year peak, and platinum, which hit a new 26-year high. Investment funds have been active in commodities, including precious metals, as they diversify their portfolios. April gold rose $2.80 to $576.80 an ounce. March silver rose 8.2 cents to $9.877 an ounce, while April platinum rose $9.20 to $1,089.30 an ounce.
Wheat futures in Kansas City led the way higher for the markets in Chicago and Minneapolis amid fund buying and strong fundamentals in an unusually active trading day.
"There are a lot of signals here that say there was some index fund buying. But it pulled us up into buy-stops from everybody, all kinds of funds. And that chased some people out of short hedges," Linn Group analyst Roy Huckabay said.
The markets were supported by concerns over crop damage by a severe drought in parts of the southern U.S. Plains. "The concerns about the production potential are starting to increase a bit. Kansas City was the leader on the rally here today, which makes sense because we probably already have taken production losses in the Southern Plains," Prudential Financial grains analyst Shawn McCambridge said.
Chicago March wheat rose 8 cents to $3.47-1/4 per bushel, Kansas City March wheat rose 9-3/4 cents to $4.02-3/4 while Minneapolis March wheat rose 7-3/4 cents to $4.00 a bushel. END
