Platinum powered to an historic high near $2,200 an ounce on Friday as supply problems in top producer South Africa triggered speculative buying, but erased gains later on profit-taking.

Bullish market sentiment also helped gold to advance and trade near Thursday's record high above $950 an ounce, but pared gains later in the day.

Spot platinum jumped to a record high of $2,192 an ounce before falling to $2,150/2,160 an ounce at 9:17 a.m. EST. It was last quoted at $2,151/2,161 in New York late on Thursday.

It's a long-term problem in South Africa and that's going to affect the platinum market for years to come. But for now, it looks like it's taking a breather, said Simon Weeks, managing director of precious metals at Bank of Nova Scotia.

We may go into sideways mode as with the economic picture looking poor, demand will also start to drop. Although it's unlikely to be enough to make up the supply shortfall, it should at least take the heat out of the panic buying.

Platinum, used in jewellery and auto catalysts, has jumped more than 40 percent this year after mines in South Africa, accounting for 80 percent of world output, were shut for five days at the height of last month's power crisis.

South African power utility Eskom said it had contracted 30 million tonnes coal of the 45 million tonnes it needs over the next two years to help resolve a crippling power crisis.

The market is not yet sure how much platinum will be available this year and the next year. While prices have adjusted already, there might be further adjustments if we realize that the supply is going to be even lower than expectations, said Frederic Panizzutti, analyst at MKS Finance.

Profit-taking is possible at any time in platinum but price dips will surely attract buying, he said.

Analysts say the global platinum deficit could widen to 500,000 to 600,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006, following seven successive years of deficits.


Ongoing supply disruptions in South Africa continue to limit platinum's downside risk, as traders view dips as buying opportunities, said in a daily report.

And with investors still increasing their holdings through the ETFs, the market deficit is expected to widen considerably with the spot price potentially set to challenge $3000/oz later in the year, it said in a daily report.

London-based ETF Securities said on Thursday its platinum exchange traded commodity fund PHPT.L had more than doubled its holdings of the precious metal to 302,000 ounces since the start of January. ID:nL21837945

In other precious metals, gold rose as high as 949.40 an ounce and was last at $945.90/946.70, against $944.40/945.20 in New York late on Thursday, when it hit a record of $953.60.

Dealers said the prospect of more U.S. rate cuts supported gold's appeal as an alternative investment and kept the upward momentum intact. Bullion has risen 14.4 percent this year.

U.S. markets are now fully pricing in a 50 basis point cut at the Federal Reserve's next meeting in March to 2.50 percent and factor in a small chance of an even bigger 75 basis points.

A rate cut tends to weaken the dollar and helps gold.

High prices has been hitting physical demand. A senior official at World Gold Council said gold imports by India, the world's largest bullion consumer, fell 72 percent in January to around 24 tonnes from a year ago,

Silver held near Thursday's 27-year peak of $18.03 an ounce. It was last at $17.93/17.98, versus $17.84/17.89 in New York. Palladium was at 504/509 an ounce, versus $510/515 in New York and a 6-1/2-year high of $525 on Thursday.

(Reporting by Atul Prakash; editing by Michael Roddy)