Singapore: Gold and platinum held near their historic highs on Monday, 28 January, on lingering fears over supply after South African mining companies suspended operations due to a power crisis which has become a national emergency.
Silver was within sight of a 27-year high and palladium hovered around its best level in 20 months hit last week, but gold’s rally hit jewellery makers in Asia.
Spot gold rose to $916.50/917.50 an ounce from $913.00/914.00 late in New York. Gold rallied to record high of $923.40 an ounce on Friday, 25 January, with dealers expecting the metal to crack the upside target of $950 in coming weeks.
“The momentum is still quite strong. It may repeat a new high around $925,” said William Kwan, a dealer at Phillip Futures in Singapore, adding that expectations of more rate cuts in the United States also underpinned sentiment.
Platinum rose to $1,685/1,690 an ounce from $1,671.50/1,676.50 an ounce. It spiked to an all-time high of $1,697 an ounce on Friday, 25 January.
South African mining companies were allowed to resume underground maintenance work on Sunday, 27 January, as the power crisis entered a third day, but mineral extraction was still not permitted.
The world’s biggest platinum producer, Anglo Platinum, and top gold miners Anglogold Ashanti, Gold Fields and Harmony had all stopped mining after they were told by the state-owned power utility it could not guarantee supplies to their operations.
“Platinum is in fact in a much better shape when it comes to the demand and supply environment. The number of cars is increasing. In countries like China, people are buying more cars. I can just talk about $1,800 within six months,” said Kwan of Phillip Futures.
Platinum is used in jewellery and auto catalysts.
Kwan pegged the downside for gold at $888.
The physical market came to a standstill on Monday, 28 January, with record-high gold prices turning away jewellers.
“Most jewellers don’t think the price is real. They are facing a dilemma. Because they hedge, they have to pay margin calls if the price goes up,” said a dealer in Singapore.
“If the price goes down, they also suffer. They are not happy. This is what I gather from the wholeseler side. Gold jewellers even think whether they should liquidate their assets and keep cash instead.”
The euro inched up against the dollar to $1.4690 reflecting caution on the U.S. currency before a Federal Reserve meeting this week, when the central bank is expected to slash interest rates again following last week’s emergency cut.
The Fed is expected to cut rates again by as much as a half-point to 3.0% after its two-day meeting ending Wednesday, although some investors were starting to doubt the central bank would act so aggressively after last week’s move.
The benchmark gold futures contract on the Tokyo Commodity Exchange ended the morning session down 13 yen per gram at 3,173 yen per gram.
The most active platinum futures on TOCOM, currently December 2008, hit a record high of 5,482 yen.
“The TOCOM market was on the rise, led by gains in the nearby months, as other Asian players started joining in to arbitrage,” said Kaname Gokon, deputy general manager at Okato Shoji Co’s research section.
Gokon said local investors who tend to trade distant months due to higher liquidity than that of nearby months should watch out for the firming February contract.
COMEX gold futures also sustained gains, with the most active February contract rising $5.9 an ounce to $916.6. It rallied to record high of $924.30 an ounce on Friday.
Silver rose to $16.48/16.53 an ounce from $16.43/16.48, not far from Friday’s 27-year high of $16.61 an ounce.
Palladium was unchanged at $378.50/383.50 an ounce.