Price of platinum jumps again

Platinum soared past $2,100 an ounce Monday as a power crisis and accidents at mines and smelters continued to curb output in South Africa, the nation that produces the largest amounts of the precious metal.

Platinum futures for immediate delivery climbed to a record $2,119 an ounce in London, compared with a closing price of $2,064 in New York on Friday.

The metal, a key element used in auto anti-pollution devices, has soared 39% in price since the start of the year.

By contrast, the price of gold, at $902.80 an ounce on Friday in New York, was up 7.7% year to date. Silver, at $17.10 an ounce, was up 14.6%.

Chronic electricity shortages in South Africa have forced production cutbacks from its mines, which provide about 80% of global platinum supply.

Making matters worse, Anglo Platinum Ltd., the world’s biggest producer of the metal, on Friday said damage to a smelter in South Africa would take four to six weeks to repair.

“This rally is unstoppable unless we see signs of production recovery in South Africa,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co. in Tokyo.

But record prices will curb demand, analysts at Blue Oar Securities said in a report Friday.

Platinum at $2,000 an ounce or more may reduce global jewelry demand to 550,000 ounces this year from 1.5 million ounces last year, Blue Oar said.

Automakers also will seek to substitute cheaper palladium for the metal, the firm said.

Still, in the near term, supply probably will fall short of demand by 300,000 ounces this year and 100,000 ounces next year, Blue Oar forecast.

Investment demand from exchange-traded funds that own platinum is helping to drive up prices, analysts said. The funds, traded in Europe, offer an easy way for investors to buy into the metal.

Ambac may be broken in half

Bond insurer Ambac Financial Group Inc. is in discussions to split itself up in a move aimed at ensuring that municipal bonds backed by the company retain high credit ratings, the Wall Street Journal said on its website Monday.

A deal could fall apart because of the complexities in such a move, said the report, quoting a source familiar with the situation.

A halving of Ambac would create one unit to insure municipal debt and one that would cover loss-ridden bonds tied to mortgages in a structure that would in effect create a “good bank” and a “bad bank,” the report said.

A spokesman for Ambac wasn’t immediately available to comment.

Last week, FGIC Corp., a bond insurer that has lost its top credit ratings, told New York regulators it wanted to split into two companies.

U.S. bond insurers, which guarantee more than $2.4 trillion of debt, have been hit hard by the sub-prime lending crisis and are struggling to keep the top ratings that are crucial for them to win new business.

New York State Insurance Supt. Eric Dinallo said last week he was making “good progress” in negotiations with the companies and major banks on a possible financial rescue for the industry.

Ambac’s shares, which fell 31 cents to $10.22 on Friday, have dived 89% since May.

From Times Wire Services