Deutsche Bank looks for Gold prices to rise for as long as the Federal Reserve delays monetary tightening, U.S. real interest rates are negative and the dollar remains weak. “While a market-friendly resolution to the U.S. debt ceiling and a recovery in U.S. real economy data may trigger a short-term correction in the gold price, we believe many of the forces that have led to a doubling in the gold price since the beginning of 2009 remain intact,” the bank says. Any U.S. budget resolution may not cure long-term deficit worries, and a credible reduction plan may not occur until after the 2012 presidential election, Deutsche Bank says. “Consequently, in the absence of a long-term plan to cut the deficit, we expect this will maintain the appeal of Gold to protect against tail events in U.S. and European fixed-income markets.” Further, the bank looks for continued real negative interest rates—in which rates are below the level of inflation--in the U.S. “Assuming real interest rates remain unchanged, it would imply the gold price moving above USD2,000/oz sometime in the third quarter of next year,” the bank says.

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