NEW YORK, Dec 7 (Reuters) - Precious metals could rally in 2008 as the U.S. dollar falls and supply flattens, JPMorgan said on Friday, ranking the sector the strongest among all commodities for next year.

JPMorgan said its favorite precious metals continued to be gold and platinum with their respective prices expected to average $815 an ounce and $1,475 an ounce for 2008, with risks strongly skewed to the upside.

The U.S. bank said that precious metals are unlikely to de-link from the dollar next year and it expected a large portion of the volatility in metals prices is likely to come from the currency markets.

"Precious metals have the most scope to rally given their leverage to currency markets and supply constraints. Mining supply growth will likely be flat in gold for the next four years, while platinum and palladium will likely remain in deficit next year," JPMorgan told clients in a note.

The bank expects precious metals to be the strongest sector in 2008, followed by agricultural products, base metals and energy.

Gold has been one of the strongest-performing assets in financial markets in 2007, as the dollar has slumped to historic lows against other currencies. It also benefited from safe-haven buying due to credit market jitters and volatile stock markets.

On the spot market, bullion touched a 28-year peak of $845.40 per ounce earlier in November, and year-to-date gains are about 25 percent. It traded at about $795 per ounce on Friday.

"We still expect the $850 major highs to be broken and a run up to around $900 to be seen before we start to look for signs of a significant top, which is in-line with our USD view," JPMorgan said.

By contrast, in equity markets the MSCI World Index .MSCIW0 is up 10 percent, and the Standard & Poor's 500 Index .SPX is up about 6 percent. (Reporting by Frank Tang, editing by Matthew Lewis)