Platinum hits record-high as funds buy, gold firms

SINGAPORE, Nov 21 (Reuters) Platinum extended Tuesday's rally and hit a record high of $1,338 an ounce as funds poured money into the precious metal, driven by long-running talk about the launch of a platinum traded fund (ETF).

Purchases by jewellers ahead of Christmas also helped spark the rally, but dealers said low liquidity exaggerated price movements. Gold tracked platinum but a firmer dollar would cap gains.

Spot platinum had slipped to around $1,320 an ounce by 0339 GMT, but was still higher than $1,251/1,256 late in New York on Monday.

''The big guys came in a relatively small margin and just squeezed the whole market up. It's illiquid,'' said Peter Tse, a dealer at Scotia Mocatta in Hong Kong, referring to a small amount of platinum changing hands.

Platinum, which is mainly used in jewellery and to clean car exhaust emissions, surpassed the previous record high of $1,336 hit in May. It has gained more than 30 percent since the start of this year.

ETFs, often backed by a physical commodity, enable investors to trade securities on an exchange and give investors a return based on commodities prices, without the need to trade futures or take physical delivery.

''The next target is $1,350 by the end of this year. If platinum reaches $1,350, gold and other metals will follow suit,'' said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo.

Rumours of a launch of a platinum ETF surfaced earlier in November but nothing has happened since. Some dealers also question the likelihood of the launch.

Sonoda said year-end demand from jewellers and the prospect of supply restrictions in top producer South Africa following a move to introduce a new royalty tax would be the main supporting factors for platinum.

He warned against putting too much hope on a platinum ETF as it would only attract limited interest from investors.

''The actual demand for platinum is only a maximum of 1 tonne, mainly in Japan. The actual investment demand for platinum only comes from Japan,'' he said.

Dealers said the platinum market is much smaller than gold and silver, which have deep liquidity and massive above ground stocks that could be used to fill a supply gap. Investors in general also have limited exposure on platinum, they said.

Investors have so far bought 17 million ounces of gold through ETFs, which at today's prices equates to $10 billion, said dealers.

In other precious metals, spot gold rose to $623.30/624.30 ounce from $622.20/623.20 late in New York.

''The market seems to be holding above $620 but my customers just stay away. Perhaps, they are waiting for more clues from platinum but I think buying may resurface at below $620,'' said a physical dealer in Singapore.

''The dollar doesn't move much either,'' he said.

The dollar was little changed at 118.05 yen The euro were a tad higher at $1.2825 Silver edged up to $12.76/12.81 an ounce from $12.74/12.81 late in New York.

Palladium rose to $322/327 from $319/323.

REUTERS SB BST1012