Platinum group metals (PGMs) rallied on Friday after deadly violence at a major South African mine fuelled speculative buying amid expectations that supply from the world's top platinum-producing country will decline further.
Platinum rose more than 2 percent on the day and ended the week up 5.5 percent, its biggest weekly gain since late February. Palladium surged 4 percent for its largest one-day rally since early July.
Platinum and palladium, however, remain sharply below their highs set earlier this year. PGMs, used by the auto industry as catalytic converters to clean exhaust fumes, have come under heavy pressure as the European debt crisis and global economic slowdown curbed car production.
South African police killed 34 strikers at its Marikana platinum mine on Thursday.
The reduction in platinum supply due to the work stoppage has so far seemed too small to drive prices higher, analysts said. Global platinum output in 2011 was 6.5 million ounces.
"It's all about expectation as opposed to actual market impact today," said Philip Newman, precious metals research director at GFMS, referring to platinum's rise on Lonmin.
Spot platinum climbed 2.3 percent to $1,467.38 an ounce by 2:26 p.m. EDT (1826 GMT), having hit a six-week high of $1,469.40. Palladium was up 4.2 percent at $603.75 an ounce.
Trading in U.S. NYMEX platinum futures neared 16,000 lots, 40 percent above its 30-day average, preliminary Reuters data showed. Turnover in U.S. palladium was also higher than usual.
As South Africa is the source of around 75-80 percent of the world's platinum, any supply disruption there is closely watched for its impact on the market balance. Lonmin typically produces around 2,000 ounces of platinum a day, or 60,000 ounces a month.
"Whether it is significantly tightening the market - at the moment, probably not. But potentially, this could have quite a long-term impact," Citigroup analyst David Wilson said.
Investors are also buying platinum due to its unusual discount to gold. The gap between much-rarer platinum and gold stood at $150 on Friday, sharply narrowing from a record of $230 set on Monday.
The price of gold, a traditional inflation hedge, flattened on Friday on uncertainty over whether the U.S. Federal Reserve and other central banks will use monetary stimulus to boost economic growth.
Chances that the Fed will launch a third round of money printing have risen slightly over the past month to 60 percent, according to a Reuters poll that also showed economists lowering economic growth expectations.
Spot gold edged up 30 cents at $1,614.60 an ounce. It lost 0.3 percent on the week.
U.S. COMEX gold futures for December delivery settled down 20 cents an ounce at $1,619.40, with trading volume more than 50 percent below its 30-day moving average.
Spot silver eased 0.6 percent at $28 an ounce.