Gold, platinum drop sharply, following oil
NEW YORK (Reuters) - Gold bullion prices fell more than 2 percent on Tuesday, reversing hefty gains earlier in the session as declining crude oil prices pulled precious metals off their lofty levels.
Spot gold trimmed midday declines to $961.20 an ounce, but remained sharply lower by late afternoon. It was quoted at $963.10/963.90 a troy ounce, down from $981.20/982.00 on Monday, when it touched a record high of $989.30.
Gold futures for April delivery on the COMEX division of the New York Mercantile Exchange dropped $17.90 to finish at $966.30 an ounce after reaching a session high of $990.30. On Monday, it soared to a record high at $992.00.
Platinum hit record highs on Tuesday as speculators bought on worries over supplies. It fell off session highs later, on news that South Africa on Wednesday might announce ways to ease the impact of job losses in the mining industry.
A mining official also said it would try to restore some power to South Africa's mining industry, which had 90 percent of its normal load rationed by the state utility.
The active NYMEX platinum contract for April delivery PLJ8 finished with $25.40 gains at $2,267.0 an ounce. Earlier, it set a record high of $2,308.80 on supply fears.
Spot platinum fetched $2,220/2,230 late Tuesday.
"South African mines might get some back power, at least there will discussions on Wednesday to see how mines might get power, which would put mines back online, meaning more supply in the market," said one platinum dealer.
Other analysts pointed out however, that inventories remain low and fully restoring power to the mines could take years.
"Platinum is very strong, inventories are low, fundamentals are very supportive," said Suki Cooper, analyst at Barclays Capital. She added that the global deficit this year could be up to 600,000 ounces.
When oil futures tumbled by more than $3 after hitting a record the previous day, precious metals prices across the board slid also. U.S. crude oil futures fell amid weak equities and expectations of increased energy inventories. Some in the market also feared that OPEC would decide at a meeting on Wednesday to keep output steady instead of raising it.
Among precious metals, platinum held its ground. Platinum, used in jewelry and auto catalysts to clean exhaust fumes, has risen nearly 50 percent this year as a power crisis disrupted mining in main producer South Africa and raised supply fears.
Despite gold's downturn, analysts said they still see scope to the upside, noting that the dollar remains on the defensive as players anticipate more U.S. interest rate cuts by the Federal Reserve to stave off possible economic recession.
"$1,000 seems likely in the near term, with global inflation expectations being fuelled by the current commodity bull run," Standard Bank said in a note.
The precious metal has gained nearly 50 percent since the credit market crisis triggered buying from investors looking for a haven from financial market uncertainty.
The dollar was trading near record lows against the euro and analysts think further losses are likely if the Fed aggressively cuts rates at its March 18 meeting.
Spot palladium rose as high as $590 an ounce, its highest in more than six years and was last at $545/550, down from $576/580 on Monday.
"We have heard commentators talk about switching from platinum to palladium in industrial applications, which we believe to be erroneous, at least for the next few years," UBS said in a recent note.
Spot silver slid to $19.71/19.76 from $20.27/20.32 at Monday's close. London silver was fixed at $20.32 an ounce.
It reached a 27-year peak of $20.60 an ounce on Monday.
(Additional reporting by Pratima Desai and Atul Prakash in London; Editing by David Gregorio)
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