(Updates with New York closing prices, analyst comments, market
activity)
By Atul Prakash and Veronica Brown
LONDON, Jan 31 (Reuters) - Gold was steady on Thursday as
the market digested gains made after the U.S. Federal Reserve
cut interest rates, while platinum hit a record high as
investors bet on further supply problems in South Africa.
Spot gold <XAU=> stood at $923.80/924.70 an ounce by New
York's last quote at 2:15 p.m. EST (1915 GMT) from
$921.10/921.80 late in New York on Wednesday, when it rallied
to $932.00 -- just below Tuesday's all-time high of $933.10 --
after the U.S. Federal Reserve cut interest rates.
Dealers said short-term momentum in gold had faded slightly
after the U.S. central bank lowered borrowing costs to 3 percent
-- as expected, with most of the outcome already factored in to
prices.
Although prices were looking heavy at current levels --
raising the prospect of a corrective sell-off -- dealers said
the market's overall uptrend remained intact.
"The move down is nothing more than ebb and flow as the
market has had its reaction to yesterday's rate cut," said Peter
Hillyard, head of metals sales at ANZ Investment Bank.
"The trend is still up and moving towards $1,000 sooner
rather than later -- I would say within two months rather than
six," he added.
Currency fundamentals also turned against bullion prices as
the dollar rose versus the euro <EUR=>, making the precious
metal less attractive for non-U.S. investors.
But the gold market was able to ignore sliding energy
prices to finish slightly higher. U.S. crude futures <CLc1>
closed down 58 cents at $91.75 a barrel, after trading as low
as $89.58 in earlier sessions.
PLATINUM SQUEEZED TO RECORD
Platinum <XPT=> raced to a record $1,741 per ounce as
investors reckoned the worst was far from over in top producer
South Africa's power crisis.
Fresh electricity supply problems in South Africa hit hopes
in the mining sector on Thursday for an early return to full
production after a five day hiatus.
State utility Eskom [] had agreed to pump up supply
to the country's diamond, platinum, gold, coal and other mines
to 90 percent by Thursday, after a power shortage halted their
operations for the five days to Wednesday. []
Dealers said that the steep backwardation in the platinum
futures market will continue to support prices of the active
contract. Backwardation occurs when the cash of nearby delivery
price rises above the price for forward delivery, signaling
supply tightness in the near run.
"The spreads are getting more and more expensive, which
means the market is going to go higher and that people are
selling July and the forwards and buying the spot April. So that
is also one indication that the market is still not ready to
come off," said Ralph D'Esposito, NYMEX floor trader with RJ
Futures in New York.
"But the fundamentals still haven't changed. The market
over the long haul is still going to be demand driven
regardless what the technicals say," D'Esposito said.
Some analysts have said they would not be surprised if
platinum prices eventually moved up through the $2,000 mark.
"Given the likelihood for further disruptions in the coming
weeks and months the metal is likely to see limited downside
movements, with dips viewed as buying opportunities by both
industrial users and investors," analyst James Moore of
TheBullionDesk.com said in a note to clients.
In other bullion markets, the gold contract for April
delivery at the COMEX division of the NYMEX <GCJ8> finished up
$1.70 at $928.00 an ounce but was off Wednesday's record high of
$942.20.
The benchmark gold futures contract <0#JAU:> on the Tokyo
Commodity Exchange ended 13 yen per gram higher at 3,195 yen.
Silver <XAG=> turned up to $16.91/16.96 an ounce from its
Wednesday U.S. finish of $16.82/16.87, while palladium <XPD=>
was flat at $386.00/389 compared with its New York close on
Wednesday.
(Additiional reporting by Frank Tang in New York, editing by
Matthew Lewis)
