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Gold may touch $1500-1800/oz next yr: Swiss Asia Cap

Published on Tue, Jan 29, 2008 at 11:14 | Source : CNBC-TV18

Updated at Wed, Jan 30, 2008 at 11:10

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Juerg Kiener , MD and CIO, Swiss Asia Capital said he expects H1CY08 to be rocky for metals. Gold is seen at USD 985-1050/oz, and may go up to USD 1500-1800/oz in 15-18 months, he said.

Base metals supply is low and a selloff risk remains on economic weakness, he added.

Excerpts from the exclusive interview with Juerg Kiener:

Q: How is the world of commodities looking in 2008, given the economic news, which is given by the US?

A: I think we are going to have quite a rocky period in the first 3-6 months of the year particularly in economic sensitive commodities, which to larger extent is base metals, and to a lesser extent, energy. So what we are looking for is the commodity exposure, which is going to be required needless of what happens to the economy.

I think food will hold reasonably up in that environment and the second thing we like in an environment where currencies are debating the purchasing power at record speeds is precious metals. Precious metals are moving up and we are seeing this trend to just about starting and we are going to see prices in the four digit numbers very soon this year.

Q: I assume you are talking specifically about gold, what kind of targets are you working with and do you think this is a sustainable run for gold or is it a bit of a safe haven strategy playing out because of what's happening in other asset classes.

A: Basically, gold is money and anti-credit. So as long as you see Central Banks bailing out their friends by interest rate cuts which are not compensating investors for inflation, the fly to something which will basically maintaining the purchasing power will continue, so gold will stick out on that.

So from a relative point of view, it hasn't really moved up like all the other commodities and has some catch up to do. So we are looking at this gap to close significantly.

For us, the first target is between USD 985/oz and USD 1050/oz where we are seeing that there is going to be a bit of a struggle because it's a four digit number but we think that its just temporary and we look at numbers between USD 1500/oz and 1800/oz as the first target in the next 15-18 months whilst much higher levels to be achieved by 2010-2012.

Q: Specifically for base metals here, which one looks strongest to do that, fall for a bit and then rebound very sharply?

A: To be honest, we have hardly got any exposure in the base metals. Nickel already had 50% correction, so it looks reasonably safe for me to look at. If you look at uranium, it looks fantastic mainly due to the fact that energy crisis in South Africa is cutting supply. If you look at gold, we have a South African output, which is basically going to be drained because of the energy crises, and the same is happening according to reports this morning in China.

So we got to do a lot, just gold producers in the world which has the problem in producing metals because of energy, so the supply side is going to be capped as well as influence some of the base metal producers. So I don't think the risk will be that big as supply is being taken off the markets.

Q: You spoke about food; do you keep an eye on the sugar and what's going on globally with that?

A: We like soft commodities, which haven't gone up as much yet. So we still like cotton, coffee and cocoa. Wheat has done already quite a bit, sugar is down quite a bit but I think corrections in things like sugar will take place and we are very happy to accumulate sugar.

So the softs will continue to run because the supply has been taken off by alternative energy and this alternative energy will be required if you want to be able to sustain economy growths. So the prices are been driven right now by traders and not by demand-supply. So setbacks in commodity market as much as 30% is common. Use them to accumulate the key holdings that you want to have.