Precious metals and agricultural commodities may extend gains in the coming months as tight supplies and a declining dollar boost demand, according to Deutsche Bank AG. A lot of agricultural commodities including corn, soybeans and wheat are “still cheap” even after recent rallies, Michael Lewis, global head of commodities research, said in an interview. The surge in gold, which touched a record this week, is not yet extreme, Lewis said yesterday in Tokyo. Commodities have jumped this year on increased demand as the U.S. emerged from recession and China, the world’s largest metals user, led expansions in Asia. Copper, used in pipes and wires, reached an all-time high today. Grains and soybeans have rallied on higher demand, trade curbs and poor harvests. “The safest long positions to have are in precious metals and agriculture,” Lewis said in the interview, referring to bets that prices will advance. For gold “the magnitude of this rally to us is not extreme,” Lewis said. Immediate delivery gold has gained 28 percent in 2010 and is set for a 10th annual gain as the dollar has dropped. The precious metal touched a record $1,424.60 an ounce on Nov. 9. Corn has gained 42 percent this year on speculation hot, dry weather in August hurt crops in the U.S., the world’s biggest exporter. Cotton reached a record $1.5195 a pound yesterday. Gold’s Rally Gold would need to rise to more than $1,455 an ounce to surpass its all-time high in real terms as measured by producer prices, Lewis said, according to a copy of remarks to clients in Tokyo today. Adjusted for changes in consumer prices, the metal would need to advance to $1,880 an ounce to reach the level seen at the beginning of the 1980s, he wrote in the remarks. “The gold price would need to hit $2,100 to represent the most powerful rally in percentage terms, and surpass the 1976- 1980 gold-price rally, when prices surged by just over 720 percent,” Lewis wrote in the speech. Gold has surged as the U.S. currency has dropped, investors have boosted holdings through exchange-traded products and central banks including India have added the metal to their reserves. The dollar has fallen as the Federal Reserve expanded a program to buy bonds to bolster growth in the largest economy. “We expect investors’ flows into gold exchange-traded funds will accelerate, as well as efforts by the Fed to devalue the dollar,” Lewis wrote in the speech to clients. Central-bank gold holdings rose by about 500 metric tons last year and may rise again in 2010, the first time they have been net buyers since 1988, Lewis said in the speech. On current trends, central-bank buying in 2010 will surpass private-sector inflows into physically backed ETFs, Lewis said in the speech. To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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