Platinum surged to a record high for the 14th straight day on Tuesday, swept up by speculators on persistent output problems in top producer South Africa.
Other precious metals were pulled along by platinum's gains with palladium hitting a 6-1/2-year high, gold firming to trade near a record peak and silver up more than 2.5 percent.
Spot platinum hit a high of $2,160 an ounce before trimming gains to $2,150/2,160 at 1557 GMT, against $2,105/2,115 late in London on Monday. It has gained more than 40 percent this year on worries about a widening market deficit.
Analysts said the current rally showed no sign of abating, with any profit-taking dips seen as buying opportunities. "The sky is the limit because I don't think that the full effect of the supply disruptions have been fully factored in," said Daniel Hynes, metals strategist at Merrill Lynch.
"This rally could go on for a while. We are going to see this market remain extremely tight. There is bound to be a bout of profit taking, but I think that will be very short-lived." Mines across South Africa, which accounts for 80 percent of global platinum supply, have been hit by a lack of energy after state utility Eskom asked the mining sector to cut power use to 90 percent of normal needs to ease shortages.
Analysts say the global platinum deficit could widen to 500,000 to 600,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006, following seven successive years of deficits.
"The platinum market is set to record another heavy deficit this year given the severe power shortages in South Africa while above-ground inventories have been depleted to historically low levels," Barclays Capital said in a report.
Barclays saw the market deficit rising to more than 600,000 ounces by the end of 2008. The world's No 1 platinum miner Anglo Platinum has said power problems would cut output by 120,000 ounces in 2008, while Impala Platinum, the world's No 2 producer, forecast "very tight market conditions."
More than 60 percent of the world's platinum output is used as catalyst in vehicles, helping to clean exhaust fumes, while nearly 25 percent goes to jewellery making. Jewellery demand was badly hit because of high prices, dealers said, adding individual investors, specially in Asia, had been selling platinum for strong returns.
"Funds and speculative buying is continuing to grip the market. There is a general feeling out there that don't be short, be long," said Rory McVeigh, trader at Commerzbank. Japanese platinum futures also hit a record, with the December contract surging 164 yen a gram to 7,064 yen.
Despite strong prices, dealers said platinum borrowing rates had been steady at 9 percent since January. They usually rise when there is a shortage in the physical market. "With the supply situation so tight in South Africa and with the platinum ETF continuing to grow, it is conceivable that platinum continues to make gains," John Reade, head of metals strategy at UBS Investment Bank, said in a client note.
Palladium tracked platinum, hitting a high of $485 an ounce before easing to $480/484, against $466/470 on Monday. Silver rose to $17.45/17.50 an ounce from $17.00/17.05. Gold rose to a two-week high of $929.90 an ounce on a weaker dollar and was last quoted at $929.30/930.00, against Monday's $903.00/903.80 and a recent record high of $936.50.
The dollar fell to a two-week low against the euro as fears of further large US bank writedowns dented sentiment on the US economy and intensified speculation of more rate cuts.
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