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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.

MARKET SNAPSHOT: Market Still Facing Headwinds From Credit, Economy

By Carla Mozee

Investors will look for U.S. stock gains to continue for a second consecutive week, but the market faces high hurdles from the ongoing credit crisis and recession fears that continue to hang over the market.

Market players will turn their attention to results from retailing giant Wal-Mart Stores Inc. (WMT) and a consumer-price inflation report that will shed more light on consumer activity in a sluggish economy.

A close eye will also be paid to action in the bond-insurance market, after New York Governor Eliot Spitzer warned Thursday that bond insurers have to move quickly to recapitalize themselves to keep their AAA ratings.

Fresh off the central bank's downgrade of the U.S. economy, investors will return from Monday's holiday to reports from the beleaguered housing sector and results from J.C. Penney Co. (JCP) and tech heavyweight Hewlett-Packard Co. (HPQ)

A three-day snapback rally, interrupted by a sell-off on Thursday, was enough to pull the major stock indexes higher this week, but it wasn't enough to convince Joe Liro, equity strategist at Stone & McCarthy Research Associates, that the market is ready to extend gains.

"As soon as you got some upside, people came in to sell. When you're selling bounces rather than buying dips, that's a clear indication that the overall trend is lower," he said.

Wall Street also will watch for results from European banking firms, many of which have been hit by the U.S. mortgage meltdown.

While concerns about recession loom large on Wall Street, Liro said that he considers the weak performance of the financial sector as the most "debilitating" factor for the market.

If the constant "litany of admissions of bigger write-downs and charges continues, it's has to be a negative next week," he added.

Britain's Barclays PLC (BCS) will report on Tuesday and France's BNP Paribas , which has warned of lower fourth-quarter profit, will report Wednesday. This week, Swiss banking giant UBS AG (UBS) recorded a $13.7 billion write-down in the fourth quarter related to its extensive exposure to the U.S. mortgage market.

Results are also due from Societe Generale , the French bank in the middle of a rogue-trading scandal that is expected to result in more than $7 billion of losses at the company.

Steven Sachs, head of trading at Rydex Investments, foresees little chance that stocks will move higher next week, particularly if Wednesday's consumer-price index report shows that consumers shelled out more money for goods and services in January.

A miss in expectations for CPI readings to remain steady "given Federal Reserve Chairman Ben Bernanke's testimony on the Hill and [Treasury Secretary Henry] Paulson's claim that inflation is not a concern and it will moderate" would hit stocks, said Sachs, who met the monetary officials' view about inflation with skepticism.

Economists polled by MarketWatch forecast the CPI to remain unchanged at 0.3%. Stripping out volatile prices for food and energy, core consumer prices are expected to stay at 0.2%.

As investors prepped for the upcoming inflation report and highly anticipated results from Wal-Mart, the world's largest retailer, signs abounded that consumers (whose spending drives about 70% of the U.S. economy) are becoming increasingly reluctant to part from their cash.

Consumer-electronics retailer Best Buy Co. (BBY) cut its full-year earnings forecast Friday because of lackluster sales after the holiday season, then consumer sentiment tumbled to its lowest level since 1992, according to a survey by the University of Michigan and Reuters.

Those developments followed Bernanke's congressional testimony Thursday said that the central bank is projecting slower growth for 2008 than in previous forecasts. Investors will hear more from the Fed on Wednesday when minutes from its most recent meeting will be released.

Investors also will get a look on Friday at the Philadelphia Federal Reserve's manufacturing survey, whose poor showing last month set off alarm bells to many on Wall Street that recession was on its way.

"Bad news is we are probably going to be in a recession. The good news is that while rate cuts cannot stop a recession, they can help to reduce the severity," said Al Goldman, chief market strategist at A.G. Edwards. "But after the rally, the dominant trend is still down, and I think that's probably going to be the direction on balance next week."

Earnings, reports

Following the Presidents Day holiday on Monday, investors on Tuesday will receive results from Wal-Mart and look for further insight into how consumers are holding up during the current economic slowdown.

Wal-Mart is expected to report a 10% rise in profit to $1.02 a share on sales of $107 billion, according to analysts polled by Thomson Financial. But in its most recent sales release, the company posted a soft 0.5% gain in same-store sales for January, below expectations of 2% growth.

Chipmaker Analog Devices Inc. (ADI) will post results Wednesday. Utility firm PG&E Corp. (PCG) and financial-software provider Intuit Inc. (INTU) will report on Thursday.

Fourth-quarter earnings growth for companies in the S&P 500 continued to weaken this past week, and now stands at negative 21.1%.

"That was down mostly due to estimate cuts to American International Group Inc. (AIG)," said John Butters, senior research analyst at Thomson Financial.

The insurer reported that its auditor questioned how the company values some of its derivatives. AIG, however, said that it has appropriate controls and procedures in place to value such exposures.

Earnings growth is on track for the worst year-over-year decline since 2001. Of the 480 companies that already have reported results, 27% of them have missed Wall Street's estimates. That's above the long-term average of 20% of companies that post below than expected figures.

The National Association of Home Builders will release its home-builder sentiment index on Wednesday, and the Commerce Department will release its January report on building permits and housing starts. Housing starts are expected remain steady, with 1.01 million homes slated for construction.

Friday's market

The Dow Jones Industrial Average (DJI) ended down 26 points at 12,348.21, but posted a 1.4% rise for the week.

The S&P 500 Index (SPX) rose 1 point to 1,349.99 for a 1.4% weekly gain. The Nasdaq Composite Index (RIXF) fell Friday by 11 points to 2,321.80 but rose 0.7% for the week.

Treasury bonds mostly rose, putting yields under pressure, as investors fled to the safety of government debt on rekindled worries about the U.S. economy and the credit markets.

Crude-oil ended nearly flat at $95.50 a barrel on the New York Mercantile Exchange.

Gold for April delivery fell $4.70 to end at $906.10 an ounce, while platinum futures extended their record-breaking run Friday on persistent worries about supply disruptions in South Africa. Platinum for April delivery soared as high as $2,079.90 an ounce.

NEW YORK (AP) - The following are key metals settlement prices Friday, compared with late Thursday, on the New York Mercantile Exchange:

April gold $906.10, down $4.70 an ounce

March silver $17.118, down 13.7 cents an ounce

March copper $3.5230, up 3.5 cents a pound

NEW YORK (AP) - Long-term Treasury prices rose Friday after the New York Federal Reserve reported that manufacturing in its region contracted this month. Another gauge showed that nationwide consumer confidence skidded to a 16-year low.

The news sent the yield on the rate-sensitive two year note briefly down to its weakest level in four years. Prices and yields move in opposite directions.

The New York Fed's Empire State index of factory activity plunged almost 21 points to a negative 11.7 reading, the weakest level in almost three years. Readings below zero show shrinkage. February also marked the fourth straight decline for the index. Economists had expected a much healthier reading of 5.75, according to Thomson/IFR.

The report helps build a case that the economy is on the brink of recession, although a recession requires two consecutive quarters of contraction and can only be declared in hindsight.

Separately, the Reuters/University of Michigan's consumer sentiment index dropped to 69.6 this month, its worst level since 1992 and down sharply from 78.4 in January. Although the news triggered a strong reaction in the bond market, some economists caution that consumer cash flow is a more tangible metric than sentiment readings.

Although the data has negative portents for the economy, it is helpful to the Treasury market, as investors generally turn to government-backed bonds when they are worried about the economy.

In addition, the report puts extra pressure on the Fed to continue cutting interest rates. The central bank cut the overnight Fed funds rate by 1.25 percentage points in January. Fixed-income investors want to see more rate cuts to rejuvenate ailing debt markets.

The benchmark 10-year Treasury note rose 9/32 to 97 24/32 with a yield of 3.77 percent, down from 3.82 percent late Thursday, according to BGCantor Market Data.

The 30-year long bond gained 25/32 to 96 24/32 with a yield of 4.58 percent, down from 4.65 percent the day before.

However, there was some selling pressure on short-term notes.

The 2-year note fell 3/32 to 100 12/32 with a 1.92 percent yield, up from 1.90 percent late Thursday. Immediately after the sentiment report the 2-year yield touched 1.82 percent, its worst level since 2004.

After hours trade had no impact on yields. At 5:30 p.m. Eastern the 10-year yield remained 3.77 percent, the 30-year yield was still 4.58 percent and the 2-year yield stood at 1.92 percent.

The yield on the 3-month note fell to 2.21 percent from 2.27 percent on Thursday, as the discount rate dropped to 2.16 percent from 2.24 percent.

In other data news, the Fed said industrial output rose modestly last month, due to strength in the utility sector. Industrial production increased 0.1 percent in January, in line with December's rise and analysts' expectations.

Separately, the Labor Department reported that U.S. import prices rose 1.7 percent in January, as oil prices jumped. In December, prices slipped 0.2 percent.

Demand for Treasurys Thursday also was stoked by a complex barrage of negative developments elsewhere in the credit markets. Since the subprime issue first surfaced last summer, Treasurys have been the asset of choice for investors spooked by the unraveling of normally stalwart forms of debt assets.

This week saw turmoil in the market for short-term auction-rate munis when bidders could not be found for weekly notes offered by a number of top-rated local government issuers. There also are mounting problems in the leveraged loan market, as well as some ongoing weakness in corporate short-term commercial paper.

"In 25 years of working in this business, I don't believe I have seen more market disruption from so many different sources," said Kevin Giddis, managing director of fixed-income trading at Morgan Keegan.

The unusual degree of queasiness about debt issued by highly reliable companies and municipalities is linked to worries about bond insurers that unwisely backed subprime debt. There are concerns that they may not be able to shore up enough capital to withstand an expected avalanche of defaults.

One of the wobbly bond insurers, FGIC Co., agreed to be split into two separate entities. One would house its structured finance business where its troubled subprime assets are sheltered. The other would contain the municipal bonds that FGIC backs which normally are considered desirable.

NEW YORK (AP) - The dollar extended its slide Friday against most major currencies after weak manufacturing data and consumer sentiment drove home Federal Reserve Chairman Ben Bernanke's comments about a gloomy economy and the possibility of further interest rate cuts.

Lower interest rates can jump-start a country's economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns.

The 15-nation euro rose to $1.4678 Friday from $1.4633, but the dollar jumped higher against the pound. The British currency fell to $1.9603 from $1.9691.

The dollar also slipped to 107.69 Japanese yen from 107.93 yen and dropped to 1.0925 Swiss francs from 1.0973 francs.

A New York Federal Reserve survey showed that manufacturing conditions in the region had deteriorated, while the central bank said that the country's industrial output rose by only 0.1 percent in January. The increase in industrial production was due mostly to higher output at utility companies because of the weather.

A preliminary Reuters/University of Michigan survey showed consumer confidence sank in February to a 16-year low.

Bernanke told Congress on Thursday the economy outlook was gloomy and signaled a readiness to keep on lowering a key interest rate to shore things up.

Bernanke also told the Senate Banking Committee that the one-two punch of housing and credit crises has greatly strained the economy. And he forecast sluggish growth in the near term. Bernanke also noted that hiring has slowed and that people are likely to tighten their belts further because of high energy prices and plummeting home values.

In other New York trading, the dollar rose to 1.0091 Canadian dollars from 99.99 Canadian cents.