Platinum rises on bargain-hunting, gold weakens

By Frank Tang and Humeyra Pamuk

NEW YORK/LONDON (Reuters) - Platinum ended nearly 2 percent higher on Tuesday, lifted by bargain-hunting after a major producer announced mine closures, but gold prices turned lower as a volatile stock market prompted selling.

Platinum rose on news of Lonmin, the world's third-biggest platinum producer, closing some high-cost mines and cutting costs to survive a market downturn.

Spot platinum was at $822.50 an ounce at 3:19 p.m. EST, up 1.9 percent from Monday's finish.

Despite the day's rise, a key industry report from the world's top platinum refiner Johnson Matthey said prices for the metal used to make autocatalysts could fall to $700 an ounce over the next six months if the economic crisis continues.

"We have uncertainties over the supply now," said PGM trader Rory McWeigh at Commerzbank in Germany. "Even profitable mining companies, like Lonmin, are not looking to develop (mines) due to expenses and the decline in price," he said.

Platinum spiked to a record $2,290 an ounce in March as a power shortage in main producer South Africa disrupted mining.

But the price has tumbled since then as car sales deteriorated and platinum also tracked declines in gold amid the banking crisis and the global economic slowdown.

The Johnson Matthey report said global demand for platinum catalytic converters from automakers will climb 2 percent to 4.23 million ounces in 2008 on higher consumption in Europe and emerging economies, despite a heavy decline in North America.