LONDON, June 6 (Reuters) Commodities slipped on Tuesday as traders weighed concerns about the Iranian nuclear dispute against fears that rising inflation could lead to higher interest rates and dampen economic growth.
The commodities sector, which often rises in response to geopolitical worries, was boosted on Monday by the threat of disruption to the oil supply from Iran, but was later hit by anti-inflationary comments from U.S. Federal Reserve Chairman Ben Bernanke.
Gold was down almost $10 from Monday's New York close to $633.50/634.50 an ounce at 1206 GMT, dragging silver and other precious metals with it.
If interest rates are raised to combat inflation, commodities could take more knocks, analysts said.
''A stated determination by the Fed chairman to stamp out inflation does not augur well for gold,'' HSBC analyst James Steel said in a daily report.
''The near-term direction for the precious metals, we expect, is likely to be a duel between interest rate hike expectations and the reaction of the dollar one side and the ongoing strife with Iran on the other.'' U.S. crude oil at $72.46 per barrel by 1207 GMT was down slightly on the previous day.
Earlier, it briefly dropped 33 cents after Iran's chief nuclear negotiator made positive noises about atomic proposals put forward by six world powers.
Key industrial metal copper -- which, with a strike in Mexico and mining problems in Indonesia has supply problems of its own -- could not resist the slide.
Copper for delivery in three months on the London Metal Exchange was at $7,630 a tonne at the end of the official open outcry session, down $150 from Monday's London close.
Trading was discouraged by the high cost of doing business on the exchange, dealers said.
''I think it is a slowdown induced by the incredibly high cost of entering the market,'' a dealer said.
''The funds have so much money and if they want to go in they can pay the initial margin, but even their activity appears to have slowed down.'' The cost of trading on the exchange has rocketed as LCH.Clearnet, which clears LME contracts, has increased security guarantees for copper from $3,700 per 25-tonne lot in May 2005 to $25,000 in May this year.
The price for copper, used in construction and electronics, reached an all-time high of $8,800 on May 11 after fund managers piled into the futures contract.
Since then, it has retreated about 14 percent, but it is still up around 73 percent since the end of last year.
SHARES DOWN Mining equities, which closely follow prices of miners' products, also were down on Tuesday.
Xstrata and BHP Billiton , which have made big gains this year, slipped around 4 percent in midday London trade.
Two new miners will be joining the FTSE 100 following the committee meeting this week, broker Numis Securities said in a report on Tuesday.
Lonmin and Vedanta both qualify for FTSE 100 index inclusion, joining Anglo American, BHP Billiton, Rio Tinto, Xstrata, Antofagasta, Kazakhmys Copper, it said.
''The eight miners now make up 113 billion pounds ($211.9 billion) in market capitalisation in the FTSE 100 making the sector increasingly difficult for fund managers to ignore. The mining sector now accounts for around 7.5 percent of the FTSE 100 total capitalisation of around $1500 billion.'' REUTERS MP GC1821