LONDON, Jan 13: Platinum spiked to its highest in almost 26-years on active fund buying and positive fundamentals, while gold is likely to test peaks last seen 25 years ago.

Platinum, used mainly to clean auto exhaust emissions, is rising on the strong performance of other precious metals and worries about supply, dealers said.

We have seen good demand from investors on TOCOM (the Tokyo market) overnight and strong demand from funds in the US I think we are going to look now to move up to $1,040 an ounce, said James Moore, analyst at TheBulliondesk.com.

He said investors were returning to the market as prices stabilised above $1,000 after earlier profit-taking by some players.

Platinum had jumped to $1,029/1,033 by 1113 GMT, its highest since March 1980, when it touched $1,047.50, and compared with $1,020/1,025 in the US market late on Thursday.

The strength in platinum prices reflects two key factors: the broad enthusiasm for commodities by investors and speculators, and the continued tight industry fundamentals, said Alan Williamson, analyst at HSBC Bank.

Johnson Matthey, the world’s biggest distributor of platinum, said in November the global platinum market was estimated to remain in deficit in 2005 and that prices were expected to hover between $890 and $1,030 over the next six months.

Rising demand for diesel cars in Europe has also boosted the metal. While palladium is a more efficient catalyst in petrol engines, only platinum is used in diesel vehicles.

Platinum demand of about 6.71 million ounces in 2005 outpaced supply of 6.59 million, mainly because of lower output from South Africa, the world’s top producer.

Gold market was relatively quiet and traded in a tight range below Monday’s peak of $550.75 an ounce, the highest since January 1981.

Dealers said the metal had tried to break that level a couple of times this week and might make another attempt in the coming sessions as market sentiment remained firm on worries about inflation and economic growth.

The market has been attracting more money, with funds diversifying their portfolios into commodities for better returns compared with stocks, bonds and currencies.

Gold surged 18 per cent in 2005 while silver was up by 30 per cent from the previous year.

Deutsche Bank lifted its gold forecast by 16 per cent to $570 for 2006 and by 26 per cent to $660 for 2007.

MKS Finance said gold prices might reach $620 in 2006, with an average price of $544 for the year.

Gold is more and more becoming an insurance policy against any type of disruptive risk and most portfolio managers believe that gold is an asset which should not be missed in their portfolios, Frederic Panizzutti, senior vice-president at MKS, said in the firm’s report.

HONG KONG: Hong Kong gold prices closed lower Friday at US$545.70-546.20 an ounce, compared to Thursday’s close of $546.60-547.10.