NEW YORK (Reuters) - Silver prices soared Wednesday on worries about short-term supplies of the metal as world markets gird for likely U.S. military retaliation after the attacks on U.S. landmarks last week.
Gold also rose but lagged silver's advance. But precious metals continued to see a certain amount of revived interest in their once-traditional role as a safe haven for investors in times of international tensions.
Many other commodity markets fell Wednesday as investors weighed the likelihood of U.S. military action with the weakness in Wall Street stocks, saying it added up to a picture of even lower consumer confidence and spending.
Oil, grains, cotton and coffee were among the key commodities posting declines. The Commodity Research Bureau index of selected futures markets ended 1.10 percent lower at 195.64, down 2.18 points.
At the Comex, silver traders said the market Wednesday was particularly concerned about the ready availability of silver. Some 29,942,691 ounces of warehoused COMEX silver stocks were buried Sept. 11 in the rubble of the World Trade Center.
Silver for December delivery shot almost 30 cents higher in the morning to $4.76 an ounce, the highest since May 24, before closing at $4.745, up 27.2 cents or 6 percent.
"The floor activity of course is crazy. There is just a complete absence of selling because traders didn't really feel there would be this kind of a move after nothing really happened yesterday," said Donald Tierney of Pell Brothers Futures.
"There appears to be a fair amount of managed account and fund buying along with the usual short covering," he said.
Traders are reluctant to trade because of the threat of war in the air. The New York Mercantile Exchange is running shortened sessions for the metals traded at its NYMEX and COMEX divisions, which start at 0930 EDT (1330 GMT) and run to 1240 EDT.
Since last Monday, silver has risen some 13 percent, from around $4.20 an ounce before hijackers slammed commercial aircraft into the twin towers and the Pentagon, in the worst-ever attack on U.S. soil.
The amount of silver buried under the ruins amounts to some 5 percent of annual mine supply. The 379,036 ounces of buried gold, by comparison, equates to less than a half a percent of mine supply.
Thus, silver -- which many consider more of an industrial commodity than a precious metal -- has now rallied more than gold, which enjoyed an 8 percent spike in prices last week before before investors went into wait-and-see mode.
On Wednesday, gold for December delivery ended $2.60 higher at $292.30 an ounce.
Many other commodities were weighed down by the widespread belief that the U.S. economy, already headed for recession before last week's attacks, would be hit even harder. Wall Street stocks closed lower for a third straight day, with the Dow Jones Industrial Average down 144 points at 8,759.
At the New York Mercantile Exchange, oil prices slumped for a third day in a row on concerns that oil demand will drop with a global recession. Traders said the market was gloomy, with war jitters, and players brushing aside assurances of steady oil supply from OPEC oil producers.
"People are very negative about the economy and there's a lot of selling going on, including funds," said Tom Bentz, analyst at BNP Paribas Commodity Futures. "This is a follow-through of what we've seen in the past two days."
Crude oil for October delivery closed 98 cents lower at $26.72 a barrel. October gasoline fell 4.07 cents to 75.25 cents a gallon and October heating oil fell 2.53 cents to 71.90 cents a gallon.
In three days since the resumption of open-outcry trading following last week's attacks, October crude has fallen $2.81.
Some analysts said a so-called war premium built into prices last week had disappeared because of speculation that military action would be limited as the U.S. and its allies move to root out terrorism.
"The clear message here is that this is not the Gulf War, when a loss of output from Kuwait and Iraq and the uncertainty over the ensuing hostilities led prices to spike to the $40 mark," said Tim Evans, senior market analyst at IFR-Pegasus.
Copyright 2001, Reuters News Service.
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