SINGAPORE Gold and platinum hit all-time highs on Friday after a power crisis closed South African mines, with dollar weakness, firm oil and expectations of more interest rate cuts in the United States providing additional support.
South Africa's three main gold producers and the world's biggest platinum miner suspended production at all their mines in the country on Friday due to a power crisis, helping send precious metal prices to new highs.
Spot gold hit an intraday high of $922.40 an ounce, surpassing last week's record and up more than 8 percent since tumbling to a three-week low around $850 this week. Gold was last quoted at $907.00/907.70 in New York on Thursday.
"It's pointing at $950. Now there's a power shortage...everything is in favour of gold for the time being," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, referring to the power crisis in South Africa.
Gold could undergo a correction after a U.S. Federal Reserve meeting on interest rates next week but the downside could be limited to $880 or $900. "I don't expect it to go down to $850 again if there's a correction this time," he said.
Platinum also hit an historic high at $1,652 an ounce on investment demand and gains in gold. The metal was last quoted at $1,606/1,611 an ounce in New York.
Trading in Tokyo's gold and platinum futures ended after they rose to their daily limit of 120 yen per gram.
"Platinum is confronted by a big supply and demand problem. The price will be very strong in the future. Within a month, the next price target is $1,650," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.
Miners in South Africa, the world's largest platinum producer, have had to deal with electricity outages as power utilities struggled to keep up with rising demand.
On Thursday, Lonmin, the world's No.3 platinum producer, cut its sales outlook for the year after first-quarter refined platinum output slid by nearly a fifth due to safety shutdowns and persistent processing problems.
Sonoda said expectations of further U.S. interest rates cuts, which have underpinned a recovery in stocks markets after a rout at the start of the week, have encouraged investors to buy commodities.
"That's a very good environment. By the end of June, gold will reach $1,000," said Sonoda, who also expected more investors to shift to gold from government bonds.
Gold had tumbled to a three-week low of $849.50 on Tuesday as falling energy and equity prices forced investors to sell the metal to cover margin calls, but the Dow Jones industrial average .DJI has since recorded two consecutive days of gains on hopes for interest rate cuts and a fiscal stimulus package.
Fed policy makers are scheduled to meet on January 29-30. A hefty emergency rate cut this week boosted sentiment in precious metals. The euro rose to $1.4745.
Oil gained more than $1 a barrel after U.S. lawmakers confirmed an economic stimulus plan that helped quell fears of a recession.
COMEX gold futures extended gains, with the most active February contract GCG8 hitting a record $923.40 an ounce.
The physical sector came to standstill in Hong Kong, but bullion dealers in Singapore saw sales of scrap from jewellers in Indonesia, which is Southeast Asia's largest gold consumer.
Gold bars were offered at a discount of 20 U.S. cents to the spot London price in Hong Kong, unchanged from last week. Gold bars were on par in Singapore.
Silver hit a high of $16.61 an ounce, its best level since December 1980, up from $16.35/16.40 in New York. Palladium rose to $380.50/385.00 an ounce from $370.50/375.50.
(Editing by Peter Blackburn)