New York platinum contracts rallied 2 percent to a record high on supply fears and strong speculative demand on Wednesday, while fund buying propelled gold futures to a sharp rebound from last session's heavy losses.
"They can talk about the American recession all they want. The only time I think these prices are going to come down is by a wave of profit taking. The South African problem is going to stay with us for a while," said Ralph D'Esposito, a floor trader with RJ Futures in New York.
By 10:46 am EST (1546 GMT), the active Nymex platinum contract for April delivery was up $37.10 or 2.1 percent to $1,822.60 an ounce, after rising to a record peak of $1,822.60. Spot platinum fetched $1,819/1,824.
South Africa's government appealed to mining companies for help in cutting power consumption on Tuesday to ease a power crisis caused by the failure of electricity generation to match economic growth. "Between 2007 and 2008, we went from a surplus to a deficit of a couple hundred thousand ounces, and that was before South Africa's Eskom utility problem," D'Esposito said.
Precious metals refiner Johnson Matthey said last November that the market would end 2007 in a deficit of 265,000 ounces after a 65,000 ounce surplus in 2006 snapped a seven-year chain of supply tightness.
An informal survey of analysts responding to a Reuters precious metals price poll showed the market balance for platinum, used in jewellery and to clean vehicle exhaust fumes, at an average deficit of 181,500 ounces by the end of 2008, narrowing slightly to 175,000 in 2009.
John Reade, head of precious metals strategy of UBS in London, told clients in a note that he expected a major liquidity squeeze in platinum at some point in 2008 mainly due to strong investment demand and the platinum exchange-traded funds. "The main problem with the platinum market is the very small stocks of physical liquidity - we estimate that total bullion stocks are less than 2 million ounces - and possibly as low as a million ounces," Reade said.
Gold futures bounced 2 percent after they finished lower for a third straight session on Tuesday as a sharply higher dollar against the euro and sagging US stocks prompted investors to take bets off the bullion market. The gold contract for April delivery at the Comex division of the Nymex was up $18.50 or 2.1 percent to $908.80 an ounce. It was trading in a $20-range between $890.00 and $911.50. Jon Nadler, senior analyst with Kitco Bullion Dealers in Montreal, told clients that flight-to-quality demand due to Tuesday's steep stock slide and renewed jewellery buying from India boosted the metal on Wednesday.
Spot gold was quoted at $904.15/904.85, versus Tuesday's New York close of $886.85/887.55. London bullion dealers fixed the afternoon spot price at $903.00.
In other metals, palladium for March delivery slipped $1.15 to $421.95 an ounce. Spot palladium fetched $416/421 an ounce. Comex March silver was up 26.0 cents or 1.6 percent to $16.605 an ounce, trading between a high of $16.700 and $16.230 an ounce. Spot silver was at $16.56/16.61, compared with its last Tuesday quote of $16.32/16.37. London silver was fixed at $16.48.
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