The cost of platinum has hit a record high on rumours that a market is to be opened up allowing traders to speculate on the price of the precious metal.

Prices touched $1,402.50 per troy ounce on the London market, before falling back to $1,390. The previous record of $1,340 was set in May.

Platinum is a key component for catalytic converters in car engines.

World demand is currently outstripping supply and prices have risen 50% in the past year alone.

This is largely due to it being a very limited resource which has an industrial application.

Industrial downside

Russia and South Africa are the two main producers of platinum and its use in catalytic conversions is growing as pollution rules are toughened.

Funds indexed against the price of silver and of gold have been launched this year - which produced a sharp growth in investor demand for the metals, pushing up the price.

This can create problems for companies who rely on the product, with some analysts saying it could generate less industrial demand.

The rumours sent shares in Lonmin, an African mining firm specialising in platinum, up more than 3%, making the company the top gainer on the FTSE 100.