* Platinum up 2 pct on fears over South African supply
* Gold rises as oil firms, dollar holds ground
* Middle East gold buying picks up as prices slip from
highs
(Recasts, updates with closing prices market activity)
LONDON, June 18 (Reuters) - Platinum and palladium prices
ended sharply higher on Wednesday as traders fretted over the
outlook for supply from South Africa, while gold gained on an
late oil rally.
Platinum climbed 2.5 percent and palladium reached a
three-month high as a South African official warned the country
could face a severe energy crisis, and after state power
utility Eskom said it would lift electricity prices.
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South Africa's public enterprises minister Alex Erwin said
on Wednesday the country could "face a very, very severe energy
crisis in one to two years' time" if Eskom failed to raise
funds in the capital markets.
Spot platinum <XPT=> rose to a three-week high of
$2,103.50 an ounce. It was last at $2,080.50/2,072.00 by late
trade in New York, compared with its Tuesday U.S. close of
$2,052.00/2,072.00.
Spot palladium <XPD=> was at $466.00/474.00 an ounce from
its previous finish of $456.50/464.50, after reaching a high of
$468.50, its firmest level since March 19.
The metals had already been firmly underpinned by supply
issues linked to South Africa's power problems and the prospect
of a miners' strike next month.
"When you have 75 percent of the world's platinum produced
in one country and you have power problems there, that is going
to be explosive in terms of price action," said BNP Paribas
analyst David Thurtell.
The republic also produces a third of the world's palladium
and 11 percent of gold mine supply.
"South Africa is the world's number two gold producer,"
added Thurtell. "When you have rising energy costs and problems
with supply, that will have an impact on prices."
Earlier on Wednesday, Eskom received regulatory approval to
raise its electricity tariffs by an additional 13.3 percent
year-on-year for 2008/2009.
The tariff increase amounts to a 27.5 percent average raise
year-on-year, the regulator said. A rise in power costs is
likely to hit all mining activity in the republic.
"We expect the power shortages in South Africa to hit
output of gold, platinum and base metals quite badly," said
Commerzbank analysts in a note.
"Global production of platinum metals in particular is
likely to suffer severely, as most platinum is mined in South
Africa," they added.
Meanwhile gold edged higher as oil prices ticked up and as
the dollar firmed a touch against the euro.
Gold <XAU=> was trading at $893.05/894.65 an ounce in late
New York trade on Wednesday, higher than $884.20/885.40 late in
the U.S. market on Tuesday.
U.S. crude futures ended 2 percent higher at nearly $137 a
barrel after a late rally, increasing bullion's appeal as a
hedge against inflation.
The U.S. gold contract for August delivery <GCQ8> on the
COMEX division of the New York Mercantile Exchange settled up
$6.60 at $893.50 an ounce.
The world's largest gold exchange traded fund, SPDR Gold
Trust, saw a 2 percent, or 12.27-tonne, inflow on Tuesday,
bringing its total holdings to 617.48 tonnes, the highest level
since April 22.
Gold ETFs issue securities backed by physical stocks of the
precious metal which can be traded on exchanges, allowing
investors to gain exposure to metals prices without holding the
metal itself.
A rise in ETF holdings has represented a key source of
demand for gold since the launch of the first precious metals
ETF in Australia in 2003.
There are also signs that Middle Eastern jewellery demand
may be picking up, with Dubai gold sales for May rising 18
percent from the previous month as easing prices brought buyers
back to the market. []
Among other precious metals, silver <XAG=> was higher at
$17.32/17.39 an ounce from $17.05/17.13 late in New York.
(Additional reporting by Frank Tang in New York; Editing by
Christian Wiessner)
