Spot platinum hit a record high in volatile European trade on Monday, as higher demand for the metal and rising borrowing rates put an upward pressure on prices, analysts said. Gold also traded in a wide range, hitting its lowest in nearly two weeks on a stronger dollar against the euro and later jumping on bargain hunting.
Platinum rose as high as $1,492 an ounce and was quoted at $1,490/1,494 by 1717 GMT, sharply up from $1,475/1,480 in New York late on Friday. "Industrial and speculative demand for platinum is manifesting itself through higher lease rates. Now some people are finding that they have to come in no matter what the price or the borrowing rates are. And that's pushing things up," said Tom Kendall, metals strategist at Mitsubishi Corporation.
"In addition, recent flows of metal into the ETF Securities platinum fund have taken a chunk of liquidity out of the market," he added. Platinum held by London-based ETF Securities in its exchange-traded fund (ETF) surged to 105,000 ounces last week from 35,700 ounces in early November, industry sources said.
Dealers said platinum short-term lease rates had risen to about 7 percent now from 4.5 to 5.0 percent about one month ago. Platinum prices have been supported this year by supply disruptions and growing demand of the metal, mainly used to clean car exhaust fumes.
Johnson Matthey, the world's top platinum refiner and fabricator, said in a report last month the market was expected to have a deficit of 265,000 ounces this year. It had a surplus of 65,000 ounces in 2006 following seven successive years of deficits.
Gold also witnessed choppy moves, with prices falling to their lowest level in nearly two weeks on a stronger dollar before steadying in late European business. The market remained vulnerable to volatile conditions during the rest of 2007, with trading becoming thinner ahead of Christmas and year-end holidays, dealers said.
Spot gold fell as low as $785.00 an ounce, the lowest point since December 6, before rising up to $798.50. It was last quoted at $791.30/792.00, against $792.70/793.50 in New York.
"The market just now is in a pre-holiday mood and we are seeing very little real business. It looks that gold is going to hold close to $800," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"Gold seems like a piece of elastic. When it falls, it flips back to $800 and when it goes above $800, it becomes a little heavy. We are going to see that kind of pattern repeating itself to the year end."
Bullion investors kept a close eye on other markets for direction. The dollar rose against the euro, boosted by year-end transactions and speculation of less aggressive Federal Reserve interest rate cuts after last week's US inflation numbers. A firmer dollar tends to reduce gold's appeal as an alternative investment to currencies and bonds.
"The funds still have interest to keep gold at around $800 and we will probably stay around this level, but if the dollar bounces back even more, then we might see a sell-off before Christmas," said Michael Kempinski, a trader at Commerzbank.
The benchmark October 2008 contract on the Tokyo Commodity Exchange ended 20 yen per gram lower at 2,905 yen after hitting a high of 2,929 yen. Palladium was down $1 at $351/354 an ounce, while silver was at $13.79/13.84, versus $13.80/13.85.