Gold, platinum slip from historic highs in Europe
LONDON (Reuters) - Gold and platinum hit record highs on Tuesday on expectations of more U.S. rate cuts and fears about South African output, but later surrendered gains as investors locked in profits.
A rise in the dollar against the euro and a promise by South Africa's state power firm to boost supplies this week to mines crippled by outages prompted bullion investors to take profits.
Spot gold rose as high as $933.10 an ounce before slipping to $928.60/929.30 by New York's last quote at 2:15 p.m. EST (1915 GMT), against $927.50/928.20 late in New York on Monday. Platinum hit $1,735 an ounce.
The active gold contract for February delivery at the COMEX division of the NYMEX GCG8 settled down $2.00 at $925.10 an ounce, while NYMEX April platinum PLJ8 also finished down $6.80 at $1,721.90 an ounce.
But sentiment remained strong and analysts said the metals would set new peaks in the near term. Gold has jumped 11 percent this year after rising 32 percent in 2007, while platinum rose as much as 14 percent on the top of last year's 37 percent rise.
"If there is a bubble being inflated here, I don't think the bubble is ready to burst. There is too much interest and I would not be short in this market," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"The situation with the power shortages in South Africa is not likely to go away in a hurry, oil prices remain high, the Fed cuts are likely to continue and investors have no faith in some of the other assets," he added.
Gold prices could drop $50 an ounce but that would not mean the rally was over, Hillyard said, adding the metal was going to hit $1,000 in a few months.
The market also came under pressure because of the dollar, which rose against the euro after a report showed unexpectedly high December orders for U.S. durable goods, but moves were muted a day before a Federal Reserve monetary policy decision.
Despite the data, many investors stayed on the sidelines, expecting a significant interest rate cut by the Federal Reserve after a two-day meeting that ends on Wednesday.
A rate cut tends to weaken the dollar as investors look for alternative assets, including gold, for better returns. Bullion prices also often move in the opposite direction of the dollar.
"The market awaits U.S. economic data and the outcome of the Fed meeting," said Tom Kendall, analyst Mitsubishi Corporation.
"Gold has already bounced $75 in just six days so it would not be surprising to see a period of consolidation or another short correction. But over the medium term, the bull market trend remains very much in place," Kendall said.
SUPPLY CONCERNS
Analysts said the power crisis in South Africa would continue to underpin precious metals prices, despite the country's state power firm promising to boost supplies this week to mines crippled by outages.
Power cuts have halted most mining in the country, which accounts for about 10 percent of global gold output and 80 percent of platinum production.
Anglo Platinum (AMSJ.J), the world's biggest platinum producer, AngloGold Ashanti (ANGJ.J), the third-largest gold producer and Impala Platinum (IMPJ.J), the second-biggest platinum producer, said they would gradually lift production.
"Ongoing power outages in South Africa, coupled with dollar weakness, have triggered further investor and speculative-related buying in the precious metal," TheBullionDesk.com said.
In industry news, Russian gold output is set to increase in 2008 after five straight years, while China's gold output rose 12.67 percent in 2007 to 270.491 tonnes, but the gain was not enough to overtake top producer South Africa.
Platinum was at $1,705/1,710, against $1,720/1,725 an ounce late in New York on Monday. Silver hit a 27-year high of $16.80 before falling to $16.64/16.69, versus $16.67/16.72. Palladium was at $389/392, higher than its previous finish of $384/389 an ounce.
(Additional reporting by Frank Tang in New York and Lewa Pardomuan in Singapore)
