NEW YORK, Feb 8 U.S. platinum futures rallied toward $1,900 on Friday on the back of a supply squeeze due to ongoing mining issues in top producer South Africa, while gold contracts also rose sharply on strong buying by commodity funds.
Market watchers had forecast that the global platinum market to be in a slight deficit, even before a power crisis in South Africa crippled mining operations in the world's largest precious metals producer. The country accounts for about 80 percent of the world's output.
James Moore, analyst at TheBullionDesk.com in London, told clients in a note that supply concerns caused by power disruptions in South Africa should continue to bolster the platinum market.
"Given the tight fundamentals, the metal could easily be squeezed to $2,000 an ounce, with dips for now still being viewed as buying opportunities," Moore said.
At 10:32 a.m. EST (1532 GMT), the active NYMEX platinum contract for April delivery PLJ8 jumped $24.70 or 1.3 percent at $1,876.10 an ounce.
The April contract had initially dropped and bottomed at $1,837.10 as investors took profits, but later reached an all-time peak of $1,884.30. Spot platinum XPT= fetched $1,873/1,883.
"The sharp rally yesterday in platinum is bringing dealers back to the market due to South African power supply problems," said George Gero, vice president of RBC Capital Markets Global Futures in New York.
On Thursday, platinum futures finished nearly 2 percent higher on speculative buying and chart-based support.
The April platinum contract, which has now reached a record high in each of the last seven sessions, has gained nearly $400, or 25 percent, in just three weeks.
Power has been restored to most South African mines, but only 90 percent of their normal requirements, leaving company executives and shareholders anxious over potential losses, and helping send precious metal prices to records on supply worries.
An informal survey of analysts responding to a Reuters precious metals price poll showed the market balance for platinum at an average deficit of 181,500 ounces by the end of 2008, narrowing slightly to 175,000 in 2009. [ID:nL23492373]
For sister-metal palladium, the NYMEX March contract PAH8 climbed $10.55 or 2.5 percent to $439.00 an ounce. Spot palladium XPD= fetched $437/441 an ounce.
GOLD AIMS FOR $930
Gold futures also jumped on strong fund buying as rising prices triggered chart-based buy stops. The news of the world's top gold miners AngloGold Ashanti (ANGJ.J) and Buenaventura (BUEv.LM)(BVN.N) reducing their hedge-books also boosted prices.
The gold contract for April delivery at the COMEX division of the NYMEX GCJ8 jumped $12.10 or 1.3 percent to $922.10 an ounce, trading between $911.30 and $924.20.
Jonathan Jossen, independent COMEX floor trader in New York, said that gold was riding on a broad metals rally in spite of initial profit taking ahead of the weekend.
On Friday, silver rose 2 percent while copper and palladium also surged nearly 3 percent.
"I just think gold is going to explode. There is big fund buying in all months in the futures market" including the December and June contracts, Jossen said.
Spot gold XAU= was quoted at $918.80/919.70, versus Thursday's New York close of $908.80/909.50. London bullion dealers fixed the afternoon spot price at $916.25.
COMEX March silver SIH8 was up 33.5 cents, or 2.0 percent, to $17.110 an ounce, trading between $16.785 and $17.160.
Spot silver XAG= was at $17.07/17.12, compared with its last Tuesday quote of $16.74/16.79. London silver was fixed at $16.95. (Reporting by Frank Tang; Editing by Marguerita Choy)