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Platinum holds near record peak, gold capped by steady dollar

Monday, February 18, 2008

LONDON (Thomson Financial) - Platinum held near a new record peak above 2,100 usd an ounce touched earlier this morning amid ongoing worries over a widening market deficit this year as power outages in South Africa continue to crimp output.

Gold meanwhile remained capped by a steadier tone in the dollar, which reduced the appeal of the precious metal as an alternative asset to the US currency.

Analysts said with the metal having failed Friday to benefit from renewed dollar weakness and strength in oil, it may well have to spend time consolidating before heading higher.

At 2.14 pm, spot gold was quoted at 903.45 usd an ounce against 903.00 usd in late New York trade Friday.

The metal has gained some 250 usd an ounce since last summer on dollar weakness and safe haven flows sparked by a worsening economic outlook in the US. However, gains have stalled recently.

Analysts note buying from physical players dried up as gold hit record peaks last month, adding there is little hope demand will recover with the Indian wedding season and Lunar New Year in China now over.

"Gold prices tend to seasonally weaken from March to August as jewellery manufacturers and other consumers buy less metal," said Fairfax analyst John Mayer.

"Lower expected consumer demand in the US, coupled with high price levels in US dollar terms, are likely to persuade jewellery manufacturers to delay purchases this year," he added.

Elsewhere, platinum was up at 2,109 usd an ounce against 2,077 usd in late New York trade Friday, having earlier touched a high of 2,116 usd amid ongoing supply woes South Africa.

Analysts doubt South African power utility Eskom will be able to buy 45 mln tonnes of coal in a bid to stave off a power crisis that has forced mines to cut their power usage to 90 pct of normal needs.

"Eskom is reluctant to purchase the coal at the spot export price, which is three to four times higher its average purchase price, and is in talks to pay somewhere in between the two levels.

"Meanwhile, the company is still weighing up various options and has still not ruled out the possibility of power buy-backs from major industrial and mining companies," said Standard Bank analyst Leon Westgate.

Last month, mines in South Africa, which produces around 75 pct of the world's platinum, were forced to shut down completely for five full days amid power shortages.

"With the platinum deficit expected to widen to 400,000-500,000 ounces this year, compared with last year's 265,000 deficit, the current upward price momentum has good fundamental support," said Standard Bank's Walter de Wet.

Platinum has hit a series of successive records over the past month, and has risen more than 30 pct this year alone.

Elsewhere, its sister metal palladium was up at 453 usd against 444 usd an ounce, having earlier set a series of fresh six-year highs, the latest recorded at 455.50 usd an ounce.

"Despite having far less favourable fundamentals compared with platinum, the metal has benefited from improved industrial and investment demand, and may look to challenge chart support at 469/480 usd in the coming sessions," said TheBullionDesk.com analyst James Moore.

Silver eased to 17.00 usd against 17.12 usd.

Posted by MOHAMED SAID at 10:02 AM  

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