Platinum hit an historic high on Wednesday as the market remained concerned about supplies from top producer South Africa following a power crisis that has hit mining operations there. Other precious metals also advanced with gold rising more than 2 percent to trade above $900 an ounce and silver gradually moving towards recent 27-year highs.
Spot platinum rose as high as $1,819 and was quoted at $1,810/1,815 an ounce at 1650 GMT, against $1,770/1,775 late in New York on Tuesday. "It's the fundamentals capturing speculators' attention. Basically, there's not a lot of platinum around and no-one wants to sell," said David Holmes, director of precious metals sales at Dresdner Kleinwort Investment bank. "Once a metal is in play, upside potential is hard to call but $2,000 is within reach," he added.
South Africa's government appealed to mining firms for help in cutting power consumption on Tuesday to ease a power crisis caused by the failure of electricity generation to match economic growth. "The lack of spare power generating capacity in South Africa is not only affecting output in the short term but has the potential to delay new projects by months or even years," Tom Kendall, metals strategist at Mitsubishi Corporation, said.
"Speculators have got this platinum bull by the horns and could easily drive the price towards $1,900. The market will remain very volatile at least until Anglo Platinum and Impala have released financial statements next week."
He said the platinum market was likely to see a deficit of at least 350,000 ounces this year and perhaps much more on top of last year's 375,000 ounces shortfall.
John Reade, analyst at UBS Investment Bank, said that the main problem with the platinum market was low physical stocks. "We estimate that total bullion stocks are less than 2 million ounces, and possibly as low as one million ounces. As well as buying platinum on dips, consider borrowing platinum in anticipation of a squeeze this year," he said in a note.
Gold bounced back above $900 an ounce as recent drops attracted physical buyers and bargain hunters, analysts said. Spot gold rose as high as $907.20 an ounce and was last quoted at $903.10/903.80, against $886.85/887.55 late in New York on Tuesday, when it hit a two-week low of $885.30 mainly on a firmer dollar.
The metal rose to a record high of $936.50 on February 1. "Expectations for further Fed rate cuts as well as concerns about the broader macro-economy and the dollar failing to convincingly halt its decline should underpin prices," said Suki Cooper, precious metals analyst at Barclays Capital.
In other bullion markets, US April gold futures rose $17.7 an ounce to $908.00. "There has been a good clean-out of the weak longs in recent days and profit-taking after all the South African and Chinese production problems. I see limited downside in the short term," said David Thurtell, metals analyst at BNP Paribas.
"Gold is getting some safe-haven flows as the equity market outlook is very poor." European stocks extended their gains as banking and mining stocks trimmed early losses and helped the market bounce back after the previous session's sharp decline.
Miners lost ground, though investors were torn between concern that BHP Billiton's monster $147 billion bid for rival Rio would succeed and hope that talk of a bid for Xstrata from Brazil's Vale would lead to a deal. Palladium rose to $416/421 from $411/415 an ounce, but was off Tuesday's six-year high of $426.50. Silver gained to $16.49/16.54 an ounce from $16.32/16.37 in New York.