Monday, August 8, 2011

UPDATE 1-COMMODITIES-U.S downgrade to hit prices, panic unlikely

* Trading seen volatile, demand outlook weakens

* Weaker dollar to give no lasting boost to commodities

* China growth still seen supporting commodities

By Manolo Serapio Jr and Dmitry Zhdannikov

SINGAPORE Aug 7 (Reuters) - Commodities, except gold, will likely fall when markets open on Monday due to a U.S. ratings downgrade and a worsening debt crisis in Europe but panic shall be avoided.

Bullion should benefit from renewed risk-aversion while outlook for demand for oil, base metals and grains deteriorates.

Strong economic growth in China -- the world's top copper consumer, No. 2 oil user and major buyer of grains -- as well as tight global supplies for some raw materials including coal and iron ore, will provide certain support and some investors may see weakness as a buying opportunity.

"It should be an orderly decline, nothing to panic about. The important thing now is that confidence doesn't slip too far," said Citigroup analyst David Thurtell.

Standard & Poor's cut the long-term U.S. credit rating to AA-plus on Friday, a move that over time could ripple through markets by pushing up borrowing costs and making it more difficult to secure a lasting recovery.

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