PRECIOUS-Platinum, palladium rise on supply fears; gold eases

Tue May 13, 2014 4:00pm EDT

* South African police deployed to the platinum belt

* SPDR sees 2.39 T outflow, first drop since May 2

* U.S. equities' record highs, dollar's gain pressure gold

* Coming up: U.S. Producer Price Index on Wednesday (Updates market activities)

By Frank Tang and Jan Harvey

NEW YORK/LONDON, May 13 (Reuters) - Platinum and palladium each rose 1 percent on Tuesday on the back of lingering supply worries as South Africa sent more police to the strike-hit platinum belt to protect miners after four were killed returning to work over the weekend.

Gold prices, meanwhile, eased 0.1 percent as investors digested news U.S. retail sales braked sharply in April but that did little to change views the economy was poised for faster growth this quarter. An intraday record high in U.S. equities, measured by the S&P 500 above 1,900 for the first time, kept a lid on the metal.

The four-month strike in South Africa, the longest and most costly bout of industrial action in the world's top platinum producer, has halted nearly 40 percent of normal global platinum production.

"A sudden end to the strike would lead to a sharp drop, but we believe the market is working under a structural production/consumption deficit, and we are therefore bullish medium- to longer-term," said James Steel, chief precious metals analyst at HSBC.

Spot platinum climbed 1.1 percent to $1,448.25 an ounce by 3:26 p.m. EDT (1926 GMT) and palladium rose 1.2 percent to $812.40 an ounce.

U.S. NYMEX platinum contract for July delivery settled up $14.10 at $1,456 an ounce, with volume at 13,000 lots, about 40 percent above its 30-day average, preliminary Reuters data showed.

Platinum stretched its premium over gold to its highest level since mid-January at around $155 an ounce as producers pushed ahead with plans to resume production.

Palladium prices also climbed on supply worries due to continued tensions near the border of Ukraine and Russia, the top producer of the metal.

On Tuesday, six Ukrainian soldiers were killed and eight wounded in an ambush by pro-Russian separatists near the eastern Ukrainian town of Kramatorsk, according to Ukraine's defense ministry.

GOLD INVESTMENT DEMAND SOFT

Tensions over Ukraine underpinned gold's safe-haven appeal, but lackluster investment demand triggered bullion selling, traders said.

Investor wariness was already showing, with the SPDR Gold Trust, the world's top gold-backed exchange-traded fund, recording an outflow of 2.39 tonnes to 780.46 tonnes on Monday, the first outflow since May 2.

Spot gold dipped 0.1 percent to $1,293.70 an ounce, while U.S. COMEX gold futures for June delivery settled down $1 at $1,294.80.

"What's pointing to lower prices are the stronger equity markets, the firmer dollar," Commerzbank analyst Daniel Briesemann said.

The dollar index rose against the euro and a basket of other currencies after a sharp decline in investor morale in Germany, Europe's largest economy.

U.S. equities were up slightly after both the Dow Jones industrial average and the Standard & Poor's 500 Index rose to intraday record highs earlier in the session.

The yellow metal is still up 7 percent this year mainly because of a strong first quarter, with prices little changed from the beginning of April.

Among other precious metals, silver inched down 0.1 percent to $19.49 an ounce. 3:26 PM EDT LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL US Gold JUN 1294.80 -1.00 -0.1 1289.10 1299.00 115,416 US Silver MAY 19.504 0.004 0.0 19.395 19.535 30 US Plat JUL 1456.00 14.10 1.0 1435.60 1461.90 12,957 US Pall JUN 817.30 8.55 1.1 802.05 818.65 4,935 Gold 1293.70 -1.60 -0.1 1289.40 1298.60 Silver 19.490 -0.010 -0.1 19.370 19.590 Platinum 1448.25 16.20 1.1 1435.50 1457.00 Palladium 812.40 9.50 1.2 805.00 817.00 TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 135,396 133,152 179,965 14.5 -0.36 US Silver 28,658 60,850 55,826 22.6 0.19 US Platinum 13,209 9,327 12,433 15.99 0.47 US Palladium 5,982 5,954 5,742 24.98 1.09 (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Jane Baird, Alden Bentley and Jan Paschal)

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