MARKETS-COMMODITIES/ (WRAPUP 1):COMMODITIES-Oil, gold knocked hard by Dubai default fearsMARKETS-COMMODITIES/ (WRAPUP 1):COMMODITIES-Oil, gold knocked hard by Dubai default fears* Commodities rocked by backdraft of Dubai default woes * Dollar rebounds as investors' risk appetite dashed * Gold swayed by dollar, but underpinned by default caution * Japan economic outlook dulls crude demand revival picture By Clarence Fernandez SINGAPORE, Nov 27 (Reuters) - Commodities withered on Friday as investors scrambled for the exits, scattered by fears that a Dubai debt default could unleash a new banking shock to choke off the world's fragile recovery from financial crisis. Prices of commodities from oil and gold to grains dropped on a rebound in the dollar as investors scrambled out of riskier assets, with the U.S. currency up half a percent against a basket of currencies by 0600 GMT. "A lot of investors have opted for very short-term trade lately, and change their positions constantly. They get nervous when they hear even the leaves rustling in the wind," said Zhu Yanzhong, an analyst at Jinrui Futures in Shanghai. Dubai's woes hit Asian financial markets hard, dragging Japan's Nikkei index to a four-month closing low, amid concerns about banks' potential exposure to any bad debt in the Gulf. Dubai has asked creditors of two of its flagship firms for a standstill on debt running into tens of billions of dollars as part of plans to restructure Dubai World, the conglomerate that spearheaded the emirate's growth. Crude oil , already riven by demand jitters over a gloomy economic outlook for Japan and bulging U.S. fuel inventories, fell by 5 percent from Wednesday's settlement to $74.03 a barrel by 0737 GMT. There was no Thursday settlement price because of the U.S. Thanksgiving holiday. The New York Mercantile Exchange will have a shortened floor trading session on Friday. Oil hit a year high of $82 early last month and is up nearly by more than two thirds so far this year, but is still just half the July 2008 high over $147 a barrel. Spot gold slid to $1,151.60 an ounce, down 3.4 percent from New York's notional close. On Thursday the precious metal hit an all-time high near $1,195 as the dollar fell to 15-month lows against a basket of currencies. For a graphic on the correlation of gold, the dollar and oil, click: http://graphics.thomsonreuters.com/119/MKT_GLD$OIL1109.gif In Shanghai, the benchmark third-month copper futures contract fell 2.6 percent to 53,500 yuan a tonne by the close of trade, retreating further from a 14-month peak of 55,500 yuan hit in the previous session. Three-month copper on the London Metal Exchange dropped 2.7 percent to $6,640 a tonne. U.S. wheat, corn and soybean futures dropped more than 3 percent. Wheat futures, which have lost 5 percent this week, came under additional pressure after the International Grains Council raised its estimate for world wheat production, reinforcing concerns over global oversupply of the grain. Further piling on the grim economic news, the latest data from Japan showed the country's consumer price index slid in the year to October at its fastest rate since 2001, with increasing signs of weak demand weighing on prices. [ID:nT357149] (Reporting by Risa Maeda in TOKYO, Rujun Shen in SHANGHAI, and Naveen Thukral in SINGAPORE; Editing by Sambit Mohanty) ((clarence.fernandez@thomsonreuters.com; +65-68703861; Reuters Messaging: clarence.fernandez.thomsonreuters.com.net)

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