Deutsche Bank Sees Gold Surging as High as $2,000 as Soros Pares His Bets

Deutsche Bank is seeing gold increase to as high at $2,000/oz despite the losses from last week. With concerns over Europe's debt crisis, gold is increasing against and many are predicting that this will continue over the next eight months.

By Rodrigo Orihuela
May 10, 2011 8:09 AM MT
BLOOMBERG

Gold, which reached a record on May 2, may surge a further 30 percent by January as investors seek to protect themselves from “economic uncertainty,” according to Deutsche Bank AG.

“I’m bullish on gold despite its current levels,” Hal Lehr, Deutsche Bank’s managing director for cross-commodity trading, said in an interview in Buenos Aires. “It could reach $2,000 an ounce in the next eight months.”

Investors including George Soros and John Paulson invested in gold as the metal surged over the past year amid a sovereign debt crisis in Europe, economic turmoil in the U.S. and civil unrest in the Middle East. This month‘s record $1,577.57 an ounce was a sixfold gain since the precious metal’s low in August 1999.

Gold fell 1.6 percent on May 4 after the Wall Street Journal reported that Soros Fund Management LLC sold precious- metal assets. Soros’ fund held shares in the SPDR Gold Trust, the biggest exchange-traded product backed by gold, and the iShares Gold Trust at the end of 2010, U.S. Securities and Exchange Commission filings show.

Gold rose for a third day in New York today as concern about Europe’s debt woes spurred demand for precious metals as a protection of wealth. Standard & Poor’s yesterday downgraded Greece’s credit rating for the fourth time since April 2010. Gold for June delivery rose $13.10, or 0.9 percent, to $1,516.3 an ounce at 11:05 a.m. on the Comex in New York.

Inflation Hedge

Bullion rose for six consecutive weeks through April 29 as the metal is seen as a hedge against inflation around the globe. Central banks in China, India and the European Union, among others, have increased interest rates in recent weeks as policymakers seek to control consumer prices with tighter monetary policy.

The U.S. Federal Reserve has kept the benchmark rate between zero percent and 0.25 percent since December 2008 and pledged to purchase $600 billion in Treasuries through June to stimulate the economy. Standard & Poor’s earlier last month revised its debt outlook for the U.S. to negative from stable.

The U.S. Treasury Department projects the government could reach its debt ceiling limit of $14.3 trillion as soon as mid- May and run out of options for avoiding default by early July.

Lehr’s so-called cross-commodity team was created by Deutsche last year to handle large investments in commodities without distorting prices with sudden inflows of cash, he said. The team focuses on investment opportunities in a portfolio of commodities, as opposed to looking at individual commodities.

Bullish on Corn

Lehr declined to offer a breakdown of all the commodities that form his portfolio, though he said he’s also bullish on corn, which has risen 92 percent in the past 12 months.

“I believe that over the next two to three years we will continue to see price levels in the $700 range although I believe the prices for this July crop will rise to over $800,” he said. “Corn crops are obviously very weather dependent and now that ethanol and bio-diesel have become so important, we see strong price support for corn from bio-diesel and ethanol.”

To contact the reporters on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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