Platinum at three-month high on Amplats overhaul; gold firm

Last Updated: Tue, Jan 15, 2013 17:20 hrs

By Jan Harvey and Clara Denina

LONDON (Reuters) - Platinum hit a three-month high on Tuesday, extending recent gains, after top global producer Anglo American Platinum said it would mothball two South African mines and sell another, cutting output by around 400,000 ounces annually.

The surge in platinum also propelled prices above that of gold for the first time in almost a year.

Spot platinum was 1.5 percent higher at $1,680 an ounce at 1603 GMT, having earlier touched $1,699.50, its strongest since October 9. The metal is up almost 10 percent on the year to date.

Platinum miners have been under intense pressure, hit by a wave of strike action in the last year while contending with rising operating costs and stubbornly depressed prices.

"Anglo Platinum will not be the last company to cut output," S.P. Angel analyst John Meyer said. "We would expect platinum miners to pull back by 25 to 30 percent, which is going to have a severe impact on prices."

Anticipation of Amplats' long-awaited review had already pushed platinum higher on Monday. The move, which will involve cutting 14,000 jobs to restore profits, may provoke a repeat of last year's strikes.

Platinum was trading at a premium to gold for the first time since March, after it traded at a historically unusual discount to the yellow metal for much of last year.

"We think there has been some stop-buying on the platinum/gold ratio," a trader at broker Triland said. "It is quite a big rally but the market is still coming down to the bottom of 2011's big range of $1,700 to $1,900 an ounce. $1,705 is the resistance number that we have at the moment."

Analysts said platinum demand was still depressed in Europe.

"There has been a 6 percent reduction in European auto production in 2012 and we expect a further 5 percent contraction this year," Citigroup metals strategist David Wilson said.

"You can take out 300,000 ounces of mine production, which tightens the market and puts into deficit, but then you also have got pretty high above ground stocks that can meet any shortfall. I think that there is not much scope for further growth and the platinum price can't push too much past $1,700."


Platinum's rise pulled other precious metals up, with palladium hitting its highest since last March at $717.50. It was last at $707.37, up 0.9 percent on the day.

Gold prices also found support from a looming battle in Washington over the government's borrowing limit. Federal Reserve Chairman Ben Bernanke spoke on the economic effects of any failure to agree to a higher ceiling.

Spot gold was up 0.9 percent at $1,681.90 an ounce, while silver stood at $31.27, up 0.8 percent. U.S. gold futures for February delivery rose 0.7 percent to $1,682.90.

"The debt ceiling debate should also offer some support as it once again raises the risk that U.S. growth could be hurt," Saxo Bank analyst Ole Hansen said.

"Gold is all about re-building confidence and the last few days have done just that. But we're not out of the woods yet, not before we see a break above 1,710."

Gold buyers in major consumer India held off making fresh purchases on Tuesday as prices rose, but strong physical buying from China is expected to continue in the next few weeks ahead of the Lunar New Year festivities.

South Africa's gold output fell by 32.2 percent by volume in November, highlighting the impact of illegal strikes, while platinum group metals production rose 3 percent compared with the same month in 2011, data showed on Tuesday.

On the wider financial markets, the dollar held steady against a basket of currencies, paring losses made earlier after Federal Reserve chief Ben Bernanke said the recovery was still fragile and warned the economy was at risk from political gridlock over the deficit.

(Editing by Veronica Brown and James Jukwey)

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