* Crude oil falls more than 4 percent * Copper hits three-week lows, gold also down * Grains slide on forecast for rain in parched U.S. Midwest By Eric Onstad LONDON, July 23 (Reuters) - Commodities tumbled on Monday on fears that Spain would need a major bailout as the euro slid to two-year lows and investors rushed to sell off risky assets. Oil prices shed more than 4 percent, copper hit a three-week low and corn spiralled down over 2 percent from record highs on Friday on forecasts of rain in the drought-hit U.S. Midwest. "When you've got fear in the markets, risk assets get sold off," said Michael Hewson, an analyst at CMC Markets. The Thomson Reuters CRB index, a global commodities benchmark, fell 1.75 percent to 299.25 by 1400 GMT, after gaining 3.6 percent last week. The 19-commodity index has added 5 percent so far for July, heading for the strongest month since October 2011. Commodities followed equities and the euro lower on worries that Spain, the euro zone's fourth-largest economy, may be forced to seek a lifeline from international lenders as Spain's regional authorities begin to go cap in hand to the central government. Spanish 10-year government bond yields hit their highest level since the euro was launched after weekend media reports that half a dozen local authorities were ready to follow in the footsteps of Valencia. Brent crude dropped as much as 4.1 percent to a low of $102.42 a barrel, after posting a fourth straight weekly gain in the previous session. U.S. crude lost 4.2 percent to a low of $88.01 a barrel. Analysts said only supply side geopolitical risks could underpin oil prices, with a string of bomb attacks in Iraq and ongoing tensions with Iran, but in the current environment these were unlikely to prevent further price falls. "There is still a lot of correction potential in oil prices," said Carsten Fritsch, energy analyst at Commerzbank in Frankfurt. "We had risen some $10 in seven days up until last Thursday. That was purely driven by perceived supply side risk but there has been no real improvement in fundamentals." STRONGER DOLLAR The dollar strengthened 0.5 percent against a basket of currencies, weighing on commodities. A firmer dollar makes commodities more expensive to holders of other currencies. The robust dollar attracted safe haven flows from investors, leaving gold exposed. Spot gold prices fell as much as 1.3 percent to an intraday low of $1,562.99 an ounce. From a technical perspective, gold is set to find support around $1,559/1,560, according to analysts who study past price patterns to determine the future direction of trade. Prices have held within a $1,525-1,675 range for more than three months. Worries about Spain and the euro zone also hit copper, which slid to the weakest point since mid-June. Three-month copper on the London Metal Exchange gave up as much as 2.5 percent to a low of $7,359.75 a tonne and aluminium lost 2 percent to $1,867 a tonne. Copper has fallen more than 12 percent since the end of the first quarter, dented by slowing growth in top copper consumer China, a shaky recovery in the United States and mounting sovereign debt problems in the euro zone. "I can't see anything over the next couple of months to support copper. We don't think quantitative easing is likely (in the U.S.) until early next year. There's more scope for China to relax (monetary policy) but we'll have to wait till later in the year," said Societe Generale analyst Robin Bhar. U.S. corn and soybean futures shed 2 percent from record highs set the previous session on forecasts for rain this week in the parched northern U.S. Midwest. Wheat fell 3 percent from a near four-year high notched late last week. "We don't think the rally is over yet, especially for corn as demand rationing, which the market has to do, is something it has never done before in terms of the scale," said Victor Thianpiriya, agricultural commodity strategist at ANZ. Chicago Board of trade September corn lost 2.7 percent cents to $8.02-1/4 per bushel, August soybeans fell 2.3 percent to $17.17-1/2 and September wheat shed 3.3 percent to $9.12. The euro zone debt worries also hit sugar and coffee futures while cocoa dipped following mixed global grindings results this month, clouding the outlook for demand. (Additional reporting by Claire Milhench, Maytaal Angel, Jan Harvey and Sam Nelson; editing by James Jukwey)

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