Gold and platinum hit historic highs for a third straight day on Tuesday and silver rallied to its highest in 27 years.

Gold's rally sent jitters through the physical market, with jewellers complaining that high prices were turning away consumers.

Gold rose as high as $929.40 an ounce, up from $927.50/928.20 late in New York on Monday, driven by technical buying and purchases from Japanese speculators ahead of a US Federal Reserve meeting on interest rates this week.

Spot platinum hit a high of $1,735 an ounce, up from $1,720/1,725 late in New York on Monday, as speculative buying from investors as well as auto makers accelerated after a power crisis forced miners in South Africa to stop operations.

'There may be a chance for platinum to visit $2,000 because of a supply and demand imbalance,' said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

'There's demand in platinum and supply is not enough.'

South African mining companies said they hoped to resume production later this week, but there was no sign of an end to power shortages that have put jobs and economic growth at risk.

The world's biggest platinum producer, Anglo Platinum, and top gold miners Anglogold Ashanti, Gold Fields and Harmony had stopped mining after they were told by the state-owned power utility it could not guarantee supplies to their operations.

Expectations the Fed will cut key US interest rates by up to 0.5 percentage point at the end of a two-day policy meeting on Wednesday after last week's 75 basis points cut also underpinned sentiment in precious markets.

Comex gold futures sustained gains, with the most active February contract hitting another record high at $930 an ounce.

'A lot of stops were being triggered when the price broke $925. Tomorrow night, the Fed will announce the rate cut decision, that's why there might be some buying ahead,' said William Kwan, a dealer at Phillip Futures in Singapore.

'For spot basis, I am looking at $945 for the upside,' he said.

Leung of Lee Cheong Gold Dealers said a weaker US dollar and interest rate cut hopes supported gold but the possibility of a correction lingered. 'We may see some sell-off after the announcement. It may consolidate after that.'    

In the physical market, dealers expected sales of scrap as well as cashing in by investors to pick up because of gold's high price.
   
'Jewellers and producers are shocked. I expect gold producers to be hedging at these price levels. They will have no choice but to hedge or their assets will be exposed to price risk,' said a dealer in Singapore.

Silver rose as high as $16.76, its best level since December 1980, to track firm gold. The metal was last quoted at $16.67/16.72 in New York.

The benchmark platinum futures contract for December delivery on the Tokyo Commodity Exchange rose by its daily 120 yen limit to 5,555 yen a gram on Tuesday.-Reuters