(Updates with quotes, prices)
By Atul Prakash
LONDON, Feb 19 (Reuters) - Platinum set a lifetime high for
the 14th straight day on Tuesday on strong speculative buying on
the back of severe output problems in top producer South Africa.
Other precious metals also advanced, with palladium hitting
a 6-1/2-year high, gold rising nearly 2.5 percent to trade near
a record peak and silver gaining more than 2 percent.
Spot platinum <XPT=> hit a high of $2,160 an ounce and was
quoted at $2,142/2,152 at 1324 GMT, against $2,105/2,115 late in
London on Monday. It has gained 41 percent this year on worries
about a widening market deficit.
"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.
"The problem is that when they stop and people do start
taking profit, the downside could be very scary."
Jewellery demand was badly hit because of high prices,
dealers said, adding individual investors, specially in Asia,
had been selling platinum for strong returns.
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, adding further upside pressure to prices," Barclays
Capital said in a report.
Barclays saw the market deficit rising to more than 600,000
ounces by the end of the current year.
PRODUCTION PROBLEMS
The world's No. 1 producer Anglo Platinum <AMSJ.J> has said
power problems would cut output by 120,000 ounces in 2008, while
Impala Platinum <IMPJ.J>, 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.
"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.
"We recommend taking some profits in any platinum length but
retaining the bulk of any long positions."
Demand for auto catalysts jumped 2.3 percent to 4,235,000
ounces in 2007, from 4,140,000 ounces in 2006, but demand from
the jewellery sector slipped 1.5 percent to 1,595,000 ounces,
according to refiner Johnson Matthey <JMAT.L>.
Japanese platinum futures also hit a record, with the
December contract <0#JPL:> 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.
Palladium <XPD=> tracked platinum, hitting a high of $485 an
ounce before easing to $480/484, against $466/470 on Monday.
Silver <XAG=> rose to $17.38/17.43 an ounce from $17.00/17.05.
A weaker dollar against the euro supported gold. Spot gold
<XAU=> rose to a one-week high of $925.40 and was last quoted at
$924.65/924.90, against Monday's $903.00/903.80 and a recent
record high of $936.50.
The dollar sunk to a two-week low against the euro as fears
of further large U.S. bank writedowns dented sentiment on the
U.S. economy and intensified speculation of more rate cuts.
(Additional reporting by Lewa Pardomuan in Singapore)
(Editing by Chris Johnson)
