Platinum hits record high

By Atul Prakash

LONDON (Reuters) - Platinum set a record high on Tuesday as strong industrial demand and market tightness prompted speculators and consumers to buy the metal.

Gold advanced more than 1 percent to trade above $800 an ounce, and remained vulnerable to wide fluctuations because of thin markets ahead of Christmas and year-end holidays.

Shortage of platinum in the spot market also lifted short-term borrowing rates of the metal to around 7 percent from about 2.5 to 3.0 percent one month earlier, analysts said.

"This is investor-driven, but supported by a strong fundamental story," said David Holmes, director of metals sales at Dresdner Kleinwort Investment Bank.

"The tightness in the market, the expectation that there could be supply issues in 2008 and robust demand have been helping the metal," he said.

Spot platinum jumped 1.7 percent to its lifetime high of $1,519 an ounce before easing to $1,510/1,515 by 11:03 a.m. ET, against $1,494/1,498 in New York late on Monday.

Supply disruptions following deadly mining accidents in South Africa, the world's main platinum producer, and growing investor demand for the metal, mainly used in jewellery and to clean car exhaust fumes, have supported prices this year.

Johnson Matthey (JMAT.L: Quote, Profile, Research, Stock Buzz), the world's top platinum refiner and fabricator, said in November the market would change course in 2007 and see a deficit of 265,000 ounces. It had a surplus of 65,000 ounces in 2006 after seven successive years of deficits.