Gold, platinum hit record highs on S.Africa

LONDON (Reuters) - Gold and platinum prices hit record highs on Friday as power cuts shut South Africa’s mines, including many of the world’s biggest.

London Metal Exchange (LME) aluminum also jumped as the market tried to price in the possibility of falling supplies in the key global metals producer.

Oil and other base metals firmed, with worries about demand allayed for now as a U.S. tax stimulus package and the prospect of further rate cuts helped soothe fears of a looming recession.

Gold topped $920 per ounce while platinum hit a record $1,697 on the power crisis in resource-rich South Africa.

The pit closures are the latest in a string of problems for the South African mining industry, which has been beset by closures due to fatal accidents and strikes over safety.

Supply concerns have been supporting platinum for months, reflected in rising lease rates for the metal.

An informal Reuters poll published earlier this week forecast the platinum market would stay in deficit in 2008, and 2009.

Analysts and investors said the prospect of further dollar weakness, due to expectations of more U.S. rate cuts next week, left precious metals well positioned to scale fresh heights.

“Precious metals is a very strong picture,” said Graham Birch, head of BlackRock’s Natural Resources fund.

“It was a very tight supply/demand situation for platinum but clearly it has been made worse by the power shortage in South Africa,” he added.

By 11:53 a.m. ET, spot gold had trimmed gains to stood at $911.50/912.40, compared with $907.00/907.70 an ounce in New York on Thursday, while platinum was at $1,678.50/1,683.50 from $1,606/1,611. Both metals rose more than 30 percent in 2007.

Aluminum jumped to $2,544 a tonne, the highest in nearly two weeks, as investors fretted over South African supply.

“If you take some of the aluminum smelters in South Africa out of the market, then I think you are potentially facing a relatively tight market in aluminum,” said Michael Widmer, analyst at Lehman Brothers.


Oil topped $91 a barrel, building on gains from the previous session after U.S. lawmakers confirmed an economic stimulus plan to dampen fears of a recession in the world’s top energy consumer.

U.S. crude was last up $1.60 at $91.01 a barrel, after jumping nearly 3 percent in the previous session to $89.41.

On Thursday, U.S. congressional leaders and the White House confirmed a $150 billion stimulus package of tax rebates for families, as well as incentives for business investment aimed at bolstering the battered economy.

This followed the surprise move earlier this week by the U.S. Federal Reserve to slash interest rates by 75 basis points.

Oil and base metals were still heavily influenced by global stock markets, although volatility in stocks was far higher.

Investors in both commodities have been spooked by growing fears that the subprime mortgage crisis could tip the United States into a recession and depress demand growth.

BlackRock’s Birch said those fears may prove to be overdone.

“I’m in the camp that thinks there will be a reasonable amount of de-coupling from the U.S. In fact world economic activity has not really been synchronized for a long time,” he added.

Additional reporting by Pratima Desai in London; Editing by Chris Johnson