U.S. Government deficit spending estimates now confirmed at US$325 billion for the current year. This figure is around 2.7% of GDP and very manageable (prior deficit spending binges have gone to 6%) This is down from last years reported US$417 billion. The drop of US$92 billion in deficit spending in the current year partly explains the strength in the US$ and weakness in gold prices.
The US economy is growing very steadily and tax receipts have been very strong. Expect the deficit spending number to contract further. Military spending in Iraq will fall dramatically over the next two years as the US tempo winds down substantially as Iraqis take over the defence of their cities and towns from insurgents entering (especially from Syria). The deficit could easily drop another US$100 billion over the next twelve months to under US$225 billion.
This trend puts a very substantial damper on higher gold prices.
