Platinum spiked to a historic high for the sixth trading day in a row on Thursday, as investors flocked to buy the metal on concerns over supply from top producer South Africa.
But prices pared gains later, as key metals retreated from their highs following a rise in the dollar against the euro after European Central Bank President Jean-Claude Trichet said eurozone growth risks were to the downside. Palladium eased after hitting a six-year high, gold fell to trade just above $900 an ounce after rising more than 1 percent towards a record high of $936.50 set on February 1.
Spot platinum rose to a high of $1,850, before falling to $1,833/1,838 at 1518 GMT, against $1,810/1,815 in New York late on Wednesday. Analysts said that despite the move of some investors to take profits from record high prices late on Thursday, the metal was poised to set new peaks in the coming months.
"Platinum prices continue to rise as energy supply in South Africa has not improved substantially," said Michael Widmer, metals analyst at Lehman Brothers. "We forecast another supply shortfall in 2008 and therefore keep our short-term price target at $2000/oz," he said. South Africa has appealed to mining companies for help in cutting power consumption to ease a power crisis caused by the failure of electricity generation to match economic growth.
Platinum producers in the country, which accounts for more than three-fourths of global output, are still facing power problems after halting mining operations for five days in January and losing significant production. "People are now talking about a very significant supply deficit yet again for platinum in 2008 and this is a problem that is not going to go away in a hurry," said Ross Norman, managing director at TheBullionDesk.com.
"Platinum is a very, very thin market in the sense that there's very little metal between the miner, the refiner, the fabricator and industrial clients. With the investment buying coming in, being a thin market, it pushes the price massively higher," he said. The market witnessed a deficit of 265,000 ounces of platinum in 2007 and analysts said the shortfall between demand and supply might jump to 300,000 to 400,000 ounces this year.
Demand for platinum jewellery had badly suffered because of high prices and New Year holidays in China, the world's top consumer of platinum jewellery, traders said. "There is no doubt that given what happened in the first quarter so far, we are likely to have another deficit this year," said Jeremy Coombes, general manager at Johnson Matthey, the world's largest refiner and fabricator of platinum.
"There is some investor activity and there were some ETF purchases last week." London-based ETF Securities now holds more than 210,000 ounces of platinum in its exchange-traded fund (ETF), backed by physical platinum.
Strength in platinum boosted gold. Spot metal rose as high as $911 an ounce before falling to $902.80/904.10, against $900.40/901.10 late in New York on Wednesday. Gold was also supported by news that safety shutdowns and operational woes hit AngloGold Ashanti's fourth-quarter results. The world's third-biggest gold miner said a power crisis would dent future production.
The company hoped to produce 4.8-5.0 million ounces of gold in 2008 against 5.48 million a year earlier. It also cut its hedging positions, one of the biggest among its peers, to 10.39 million ounces in the quarter from 10.58 million as of December 31. Palladium rose to a high of $429 an ounce before falling to $419/424, versus $416/421. Silver was at $16.69/1.74 an ounce, up from $14.46/14.51.
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