COMMODITIES : Inflation Fears Spark Metals Rally

Platinum futures surged about $10 an ounce Wednesday and helped rally the other precious metals as the markets digested new indications of inflation and economic growth.

In other trading, energy futures were sharply higher; grains and soybeans advanced; stock index futures sank, and livestock and meat futures were mixed.

Fears of inflation have been supporting precious metals futures prices since the October stock market crash. Fresh indications of economic vitality, such as Tuesday’s government report of a dramatic narrowing of the trade deficit, are viewed as especially constructive for platinum and silver, which double as industrial metals.

“The inflationary scenario is moving the precious metals higher and the scenario of an expanding economy is moving the industrial metals higher at a faster clip than gold,” said Bette Raptopoulos, metals analyst in New York with Prudential-Bache Securities.

Lower Treasury bond prices--indicating higher interest rates--and higher prices for grain, soybean and energy futures, also supported the metals, said Sharon Ziemian, an analyst at Citibank in New York.

Ziemian said fears of recession have also reawakened on the metals markets.

“There’s a fear that you could get a sudden push up in prices and interest rates across the board, get a quick, sharp pop, and then you’ll get a recession,” she said.

Gold Futures Advance

Platinum settled $9.90 to $10.10 higher on the New York Mercantile Exchange, with the contract for delivery in July at $563.30 an ounce.

On the Commodity Exchange in New York, gold settled $1.70 to $2.80 higher, with June at $458.10 an ounce; silver was 14.5 cents to 15.4 cents higher, with May at $6.685 an ounce.

Oil futures fell sharply on the New York Mercantile Exchange in reaction to an industry report showing an unexpected buildup last week in inventories of distillates, including heating oil.

The re-establishment of diplomatic relations between France and Iran also weighed on the markets as traders anticipated an increase in exports of Iranian crude oil to France, said Nauman Barakat, energy analyst with Shearson Lehman Hutton Inc.

West Texas Intermediate crude oil settled 14 cents to 33 cents lower, with June at $17.43 a barrel; heating oil was 0.35 cent to 0.71 cent lower, with June at 47.07 cents a gallon, and unleaded gasoline was 0.26 cent to 0.51 cent lower, with June at 52.23 cents a gallon.

Grain and soybean futures finished higher on the Chicago Board of Trade after some meteorologists modified their forecasts for badly needed rain in crop-growing areas.

Wheat futures turned in an unusually strong performance as talk circulated that dry weather had damaged enough of the maturing soft red winter wheat crop to significantly affect yields, analysts said.

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