* Platinum hits 17-mth peak, palladium highest since 2008
* BofA Merrill Lynch raises 2010 platinum target to $1,750
* Gold looks overvalued, could trend sharply lower-analyst
(Recasts, updates comments, closing prices, market activity,
adds NEW YORK to dateline)
By Frank Tang and Michael Taylor
NEW YORK/LONDON, Jan 19 (Reuters) - Platinum and palladium
prices jumped on Tuesday, hitting their highest levels since
mid-2008, with investment demand fueled by the recent launch of
exchange traded funds in the United States.
"The essence of platinum's rally is the continued success
of the U.S.-based ETFs, which are driving platinum group metals
demand," said James Steel, chief commodities analyst at HSBC in
New York.
Steel said platinum demand also got a boost from a positive
tone at last week's Detroit Auto Show, and some metals
investors using a "long platinum, short gold" strategy.
Spot platinum <XPT=> rose to $1,647.50 per ounce, its
highest since August 2008, and was at $1,644 an ounce by 3:49
p.m. EST (2049 GMT), against $1,612 quoted late on Monday.
Palladium <XPD=> hit a high of $465 an ounce, a level not
seen since July 2008. It was last at $465 versus $457.50.
Bullion investors also took heart from the platinum group
metals (PGMs) rally. Gold <XAU=> was at $1,138.50 an ounce
against $1,132.50 an ounce on Monday. U.S. gold futures for
February delivery <GCG0> settled up $9.50 at $1,140 an ounce.
A U.S. subsidiary of London's ETF Securities launched the
United States' first platinum and palladium-backed ETFs earlier
this month, and uptake has been healthy. []
Holdings of ETFS Physical Platinum Trust <PPLT> rose to
119,941 ounces on Friday from 89,948 ounces from Thursday,
while ETFS Physical Palladium Trust <PALL> also climbed to
124,897 ounces from 99,977 ounces during the same period.
Bank of America Merrill Lynch on Tuesday raised its 2010
platinum forecast to $1,750 an ounce from $1,440 an ounce, as
new U.S. ETFs spurred investment buying and an improving auto
sector boosted demand for the metals used in autocatalysts.
[]
Analysts said appetite for the funds had a disproportionate
effect on the platinum and palladium markets, much smaller in
volume terms than gold.
In addition, signs that the global economy is steadying and
expectations that central banks may start draining funds from
the banking system or raising interest rates later in the year
also prompted investors to buy the strategic platinum group
metals.
GOLD OVERVALUED?
Gold turned higher on Tuesday in the face of a stronger
dollar. But one analyst said gold could sell off in overbought
conditions after sharp gains driven mainly by investment
demand.
"When the central banks showed they can withdraw excess
liquidity and curb inflation, we will see gold trending closer
to its fundamental value, and the crisis rationale for holding
gold will be removed," said Michael Crook, investment
strategist at Barclays Wealth Americas.
Crook said he expected increased selling in gold ETFs, and
pegged the metal's fair value based on fundamentals at between
$700 and $800
Holdings of the SPDR Gold Trust <GLD>, the world's sixth
largest holder of gold ahead of China, Japan and Switzerland,
have declined nearly 21 tonnes so far this year, compared to a
rise of some 15 tonnes in the same period of 2009.
[]
Among other precious metals, silver <XAG=> prices were at
$18.73 an ounce versus $18.61 an ounce late on Monday.
(Reporting by Frank Tang and Michael Taylor; Editing by
David Gregorio)
