NEW YORK, Aug 8 (Reuters) - Cotton futures closed sharply
lower Monday on investor sales as the selling spree sparked by
the U.S. credit downgrade pulled fiber contracts down and will
likely depress values this week, analysts said.

World stocks sank to the lowest level in nearly a year by
Standard & Poor's downgrade of the U.S., with gold soaring to
record ground above $1,700 an ounce.

The key December cotton futures on ICE Futures U.S.
dropped 3.86 cents or by 3.8 percent to finish at 97.72 cents
per lb, dealing from 97.58 cents to $1.015.

Total volume traded stood over 14,000 lots, less than half
a percent above the 30-day norm, Thomson Reuters preliminary
data showed.

'I think the gravity of all this is pounding the weaker
markets and this includes cotton,' said Jobe Moss, an analyst
for merchants and brokers MCM Inc. in Lubbock, Texas.

Independent analyst Mike Stevens of Louisiana said
automatic sell orders were touched off as fiber contracts
tumbled.

Fundamentally, the market has priced in a severe drought in
Texas and other U.S. cotton growing regions.

But the dominant factor is the weak global economic outlook
and how another economic downturn could further depress cotton
demand and push prices lower, dealers said.

Despite the problems in Texas, supplies are otherwise
plentiful in other countries in the global market.

The market is looking forward to next Thursday when the
U.S. Agriculture Department hands out its first monthly supply
report for the 2011/12 marketing year (August/July) following
actual field surveys covering the period up to Aug. 1. USDA
also plans to release the Gaey Shaoow

Technicians feel the market will return to a near-term
target at $1.135, which represents the break below the neckline
of a head and shoulders pattern that took several months months
to form.

Total volume traded Friday hit 15,021 lots, about a quarter
below the 30-day average, ICE Futures U.S. and Thomson Reuters
data showed.

Open interest was at 143,489 lots on Friday, exchange
figures showed.