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By Atul Prakash and Veronica Brown
LONDON, Jan 28 (Reuters) - Gold and platinum closed in on
recent record highs on Monday, boosted by dollar weakness and a
power crisis in major producer South Africa that cut output.
Spot gold <XAU=> hit an intraday high of $922.90 per ounce,
just 50 cents off Friday's record $923.40. It stood at
$920.80/921.70 an ounce by 1550 GMT, against $913/914 late in
New York on Friday.
The dollar fell versus the euro, making bullion priced in
the U.S. currency cheaper for non-U.S. investors, as markets
anticipated the U.S. Federal Reserve's policy meeting this week.
Markets are betting that the Fed will cut interest rates by
as much as 50 basis points after the two-day policy meeting
ending on Wednesday, following last week's hefty 75-basis-point
cut in a rare move between scheduled meetings.
Those expectations were heightened after data showing weaker
than expected U.S. new home sales in December.
On the fundamental front, South African mining companies
hope to resume production later this week after being allowed to
carry out underground maintenance work in mines across the
country that have been crippled by a power crisis.
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"Gold is seeing support from the weaker dollar combined with
the news out of South Africa," Alexander Zumpfe, precious metals
trader at Heraeus said.
"The environment should remain overall supportive, whether
it will finally really touch $1,000 has to be seen," he added.
In other bullion markets, U.S. gold futures sustained gains,
with the most active February contract <GCG8> rising $10.30 an
ounce to $921.10. It rallied to a record high of $924.30 an
ounce on Friday.
With the dollar's fall, sliding stock markets and U.S.
recession fears persisting, analysts said safe-haven sentiment
for gold remained positive.
"Gold looks set to benefit from further demand as investors
seek to diversify their portfolios, factoring in some safe-haven
type assets," said James Moore, analyst at TheBullionDesk.com.
"Gold should now look to challenge the $940 area," he added.
CRIPPLED OUTPUT
Analysts said production problems in South Africa, which
accounts for about 10 percent of global gold output and 80
percent of platinum production, might support the white metal
more than gold.
The world's biggest platinum producer, Anglo Platinum, and
top gold miners Anglogold Ashanti, Gold Fields and Harmony all
stopped mining after they were told by the state-owned power
utility it could not guarantee supplies to their operations.
"We are now concerned that the shortfall in production will
need to trigger a structural change in the platinum market,"
said John Reade, analyst at UBS Investment Bank, in a daily
report, adding the metal might rise to $1,800 in one month.
Platinum <XPT=>, mainly used to make jewellery and to clean
vehicle exhaust fumes, stood at $1,691/1,695 per ounce, compared
with $1,671.50/1,676.50 in New York on Friday when it hit a
record $1,697.
Other precious metals were pulled up on the momentum in gold
and platinum with silver <XAG=> at $16.52/16.57 an ounce from
$16.43/16.48 on Friday when it hit a 27-year high of $16.61.
Palladium <XPD=> also rose to $380/385 an ounce from
$378.50/383.50.
(Editing by Peter Blackburn)
