$2,000 Gold in 2012, But “High Probability” of a Bubble

Gold will reach $2,000 per ounce by 2012, but there is a “high probability” of an eventual bubble in the yellow metal, according to Deutsche Bank.

In its latest outlook on the gold market, Deutsche Bank wrote that “We believe the main beneficiary of super low interest rates in the United States, a weak U.S. dollar, a view that central bank holdings in the U.S. dollar are still excessive and ongoing questions over the stability of the financial system will be gold.”

With regard to the potential for a gold bubble, the firm cautioned that a “high probability” exists that a bubble may be developing in the gold market. Deutsche Bank’s assertion was based on the recent tendency by investors to acquire positions in gold when the U.S. dollar is both rising and falling, and to buy gold as a hedge against inflation and deflation.