Platinum roared to a record high and palladium hit a six-year peak on Monday as supply concerns persisted in top producer South Africa due to an electricity crisis, analysts said. But gold and silver slipped after setting new peaks on Friday. Analysts said the metals were consolidating gains before starting their march again to scale new highs.
South African mines that produce four-fifths of the world's platinum made slow progress in bringing back production after the state power firm allowed them only limited increases to their electricity consumption.
"The platinum price has been driven to record levels by the problems with flooding and power shortages in South Africa. This has seen strong investor buying," Tom Kendall, precious metals strategist at Mitsubishi Corporation, said.
"Although 90 percent of power has been restored to the mines, the impact on production has yet to be fully determined. That said, the price is due for a correction from current inflated levels and with most Chinese buyers on holiday, any correction may be steep."
Platinum hit a high of $1,789 an ounce before easing to $1,786/1,791 at 1542 GMT, against $1,752/1,759 late in New York on Friday. Palladium rose as high as $420.50 and was last at $420/423 an ounce, versus $410/413, tracking platinum.
The benchmark platinum futures contract on the Tokyo Commodity Exchange also touched a record high of 5,870 yen per gram. It ended at 5,868 yen, up 187 yen from Friday's close.
Platinum and palladium are used in jewellery and in vehicle catalysts, where they help clean exhaust gases. "Despite the relatively quick restoration of at least some production, one should not underestimate the production loss and its implications on this year's supply-demand balance," Wolfgang Wrzesniok-Rossbach, head of sales at Germany's Heraeus, said.
With a loss of around 15,000 ounces a day due to the power cut and another 50,000-70,000 ounces due to flooding at one of the mines of Anglo Platinum, a total of 150,000 ounces might have been lost. As a result, the annual deficit could climb this year above 400,000 ounces - the highest in 6 years, he said.
GOLD, SILVER SLIP: Gold fell more than 2 percent to its lowest level in nearly two weeks on profit-taking and technical selling. "It's Chinese New Year. A lot of the Far Eastern speculators have closed down their long positions and taken money to go and celebrate," said Tony Dobra, precious metals trader at Standard Chartered Bank. "While a lot of Asia will be on holiday, we may well see it drift down towards $850. There is a some technical selling also and the lower we go, more technical selling will come in."
Spot gold fell as low as $891.65, the lowest since January 24, before paring losses. The metal was last quoted at $896.70/897.60, still down from $910.00/910.75 late in New York. In other bullion markets, US February gold futures fell $12.3 an ounce to $901.30 in electronic trade. "It looks like longs in gold are taking profits.
People are also shifting money into palladium and platinum at the moment," said Michael Blumenroth, a trader at Deutsche Bank. Despite a sell-off, the market remained convinced that the metal might advance well beyond Friday's record high of $936.50 an ounce during 2008.
"We have increased our gold price forecast to $890/oz from $840 due to an increasingly favourable price environment evolving for gold, supported by both supply and demand dynamics, external drivers and a positive technical perspective," Barclays Capital said in a market report.
"Recessionary fears, inflation concerns, Fed rate easing, dollar weakness and geopolitical tensions are some of the factors that have the potential to drive gold prices onwards and upwards towards $1,000/oz in the months ahead." Investors kept a close eye on the dollar, which eased against the euro after falling to near-record lows on Friday. Gold often moves in the opposite direction of the dollar. Silver fell to $16.60/16.65 from $16.75/16.80 an ounce on Friday, when it hit a 27-year high of $17.27.
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