Hedge Fund Heavyweight Sees Gold at $2,200

(Sept 19, 2011 by Chanyaporn Chanjaroen)

Gold, platinum and Brent oil will lead gains in commodities as investors seek to protect their assets and shortages emerge, according to Tony Hall, the hedge- fund manager who earned 33 percent for his clients this year.

Gold may climb 21 percent to a record $2,200 an ounce by the end of 2011, platinum may gain 10 percent, said the London- based chief investment officer of Duet Commodities Fund Ltd., which manages more than $100 million of assets. Its eight-month gain compares with a mean return of 0.6 percent across commodity hedge funds tracked by HedgeFund.net and beat larger rivals such as Clive Capital LLP and Fortress Commodities Offshore Fund Ltd.

“The fear of recession, the fear of worse economic numbers is weighing on commodities and stopping gains from fundamentals from coming through,” said Hall, 31, who spars as a heavyweight boxer. “We still believe in the gold story. If you believe the world is in trouble or in further economic growth disruption, then gold is a good safe haven. If you believe that the world is going to come out okay, then it’s a good inflation hedge.”

At a time when the MSCI All-Country World Index of global equities declined 10 percent this year, the Standard & Poor’s GSCI measure of 24 commodities advanced 2.7 percent, led by silver, gold and energy.

Investors held about $431 billion in raw materials by July, an almost fivefold gain in six years, Barclays Capital says. As equity holders contend with losses of $8.5 trillion since May, speculators made their biggest wagers on higher commodity prices in almost three months in the week to Sept. 6 as they anticipated that even weaker economic growth will mean shortages.

Winning Run

Gold advanced 28 percent to $1,819.88 this year, heading for an 11th consecutive annual gain, the longest winning streak in at least nine decades. It’s the second-best performer in the S&P GSCI behind silver, which rose 31 percent. Gold is trading at 45 times the price of silver, down from a multiple of 84 in 2008. Silver, the precious metal most used in industry, rose more than threefold to $40.4338 since the end of that year.

The gold price of $2,200 predicted by Hall would be 15 percent more than the all-time high of $1,921.15 reached Sept. 6. It would still be below the then-record $850 reached in 1980, equal to $2,337 now in inflation-adjusted terms. Bullion had tumbled 5.7 percent from its all-time high by Sept. 16.

Central banks are expanding their gold reserves for the first time in a generation. Euro-area nations added 0.8 metric ton to their holdings this year, the first increase since 2001, International Monetary Fund data show. Central banks and government institutions worldwide bought 192.3 tons in the first half, according to the World Gold Council.

Platinum Bull

Duet is also bullish on platinum, which gained 2.3 percent to $1,810.38 an ounce this year. The metal, mined mostly in South Africa, will trade as high as $2,000 to $2,200 this year, Hall said. Holdings in exchange-traded products backed by the commodity are at a near-record 44.3 tons, valued at about $2.6 billion, data compiled by Bloomberg show.

Platinum is trading at a ratio of 2.5 times the price of palladium, compared with a 10-year average of 3.5. The metals are mined together and both are used in autocatalysts.

Platinum supply will fall 21,000 ounces short of demand this year, widening to a deficit of 54,000 ounces in 2012, Barclays Capital estimates. Mining companies are going as deep as 1.4 miles underground to maintain output, pumping chilled air down mine shafts to cool seams as hot as 160 degrees Fahrenheit.

“Platinum looks like great value in the precious metals complex,” Hall said. “Platinum is a store of value, a precious metal and an industrial metal. If the economy picks up we’re going to see bigger demand in catalytic converters.”