Platinum, used in auto catalysts and jewellery, rallied 4 percent on Tuesday as speculators jumped into the market after a drop the previous day, while gold tracked oil's fall from record highs.
Spot platinum hit a high of $2,060 an ounce, up from $1,980/1,990 late in New York on Monday, when it tumbled to its lowest in almost four weeks at $1,926 on news that miners in South Africa would get more power supply. Supply concerns triggered by mining disruption in South Africa, the world's main producer, propelled platinum to record high at $2,290 an ounce on March 4.
The metal has risen as much as 50 percent in 2008. "Fundamentally, platinum market is still driven by fears of tight supply. It's difficult for us to expect miners to go back to full operation without enough power supply," said a precious metals dealer in Tokyo.
"Investment demand is quite strong and I don't think supply will catch up with demand. Of course, the price will go up quite fast, but profit taking will also happen because speculators want to enjoy a huge amount of profit," he said. South African power utility Eskom is in the process of restoring power to 95 percent of normal levels to the mining industry and will, following the same process, restore power IN full eventually to all industrial consumers including mining companies, the power industry source said.
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 benchmark platinum futures contract for February delivery on the Tokyo Commodity Exchange ended the session 125 yen per gram lower at 6,582 yen, hit by a firming yen.
"Tokyo prices are off lows mainly due to bargain-hunting, but platinum stays in a downward corrective phase due to growing views that supply situation in South Africa would improve," said Hisaaki Tasaka, market analyst at Ace Koeki Co Ltd in Tokyo.
"I think the market would need further downward correction before it can climb strongly again." Gold slipped to $973.50/974.30 an ounce from $974.10/974.90 late in New York on Monday and remained below a record high of $991.90 an ounce hit on March 6.
Gold struggled to sustain the uptrend after a failure to break through the $1,000 barrier last week. It has gone up as much as 19 percent in 2008, driven by record high oil and expectations of further interest rates cuts in the United States. "The key resistance is currently at $992 and only on a breach of this level gold's move beyond $1,000 can be confirmed," said Pradeep Unni, analyst at Vision Commodities in Dubai.
"Alternatively, if gold slips below $970, then it could slide to $940 levels." US crude oil futures edged down on Tuesday, after hitting a record near $108 a barrel the previous day as investors sought a hedge against weak dollar and inflation. Gold futures for April delivery on the Comex division of the New York Mercantile Exchange rose $4.1 an ounce to $975.9. Silver edged up to $19.68/19.73 an ounce from $19.64/19.69. Spot palladium rose to $473/478 an ounce from $467/472 an ounce.