Oil, metals and gold plunge as investors shun risk

* Oil dives $4; minimal damage from Hurricane Ike

* Gold down 1.5 percent; safe-haven buying fades

* Limited impact on metals from China rate cut

SINGAPORE, Sept 16 - The financial meltdown on Wall Street gripped commodities markets on Tuesday as investors sought refuge in cash and risk-free assets, pulling down crude oil 4 percent, gold 1.5 percent and grains 2 percent.

As Lehman Brothers' bankruptcy, the sale of Merrill Lynch and a struggling American International Group raised fears of a deep U.S. recession and weak demand for resources, investors rushed to unwind positions in commodities.

Even a falling U.S. dollar and speculation that the Federal Reserve could hint at a rate cut when its meets later in the day did little to trigger interest in commodities -- often seen as safe-haven assets at times when currency markets are falling.

And as the worst financial crisis since the Great Depression threatens to grip the U.S. economy, the Reuters-Jefferies CRB index, a global commodities benchmark tracking 19 futures markets, fell more than 3 percent to near nine-month lows.

"This refreshes in people's minds that the problems in financial markets still have a way to go," said ANZ's senior commodity analyst Mark Pervan.

Oil fell to a seven-month low, as economic worries, coupled with reports that Hurricane Ike caused minor damage to U.S. oil platforms and refineries, prompted investors to cut positions.

U.S. light crude for October delivery which fell as much as $4.11 at one point, was down $3.73 at $91.97 a barrel by 0450 GMT, adding to the previous session's more than $5 fall and almost 37-percent decline from its peak above $147 in mid-July.

"Lehman Brothers' failure has magnified existing worries about the international economic outlook, adding to fears of slower demand for commodities," said David Moore, commodity strategist at Commonwealth Bank of Australia.

"Early reports suggest that Hurricane Ike ... caused only limited structural damage to oil infrastructure," he added.

GOLD AND METALS FALL

As safe-haven buying faded, gold which had closed sharply higher in the last session, changed course and lost 1.6 percent, or $12.80, to $773.40 an ounce from Monday's nominal close in New York.

"Investors want to hold cash or bonds. Gold was bought initially, but basically many investors treat gold and other commodities as risk assets," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.

Among metals, copper fell over 3 percent in Shanghai. London Metal Exchange copper lost 1.2 percent, or $85, to $6,845, after slipping 2.7 percent in the previous session. The London Metal Exchange said it had declared Lehman a defaulter.

Overnight China's central bank tried to soothe domestic markets with an unexpected cut in interest rates for the first time since February 2002 and reduced the reserve ratio for the first time since November 1999.

"The cut by the central bank will support cash-strapped metals consumers, but it won't have a big impact on prices in the near term as there are too many other things going on," a dealer in Shanghai said.

In grain markets, Chicago Board of Trade soybeans for delivery in November fell 1.7 percent to $11.59-¼ per bushel and December corn fell almost 2 percent to $5.51 per bushel. Wheat eased 0.6 percent to $7.22-½ per bushel.

"Grains are better than other commodities but the upside movement is restricted as there won't be any fresh liquidity coming into the market," said Nicholas Chung, senior manager of the commodities team at Korea Development Bank in Seoul.

Malaysian crude palm oil futures slumped 5 percent to hit a 17-month low. The benchmark December contract on the Bursa Malaysia Derivatives Exchange fell as much as 113 ringgit to 2,136 ringgit ($619) a tonne, a level unseen since April 10.