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August 22, 2011 Dear Friend,
We write that "Gross Private Product"
continues to behave quite well in the U.S. and EU, excluding "G" or
government spending. One could argue that such is a highly desirable thing,
as government spending is riddled with waste, corruption and social welfare
discourages work, productivity and output. While GDP = C + I + G + X - M,
maybe it is meaningful to exclude government spending from definitions of
productive output. Or certainly it is not a serious cause for alarm if a
declining GDP outlook stems from fiscal responsibility.
We raised our gold price estimate for 2011 to $1,700 from $1,525, 2012 to $2,300 from $1,500, 2013 to $2,000 from $1,200 and 2014 onwards to $1,500 from $1,400. We raised our silver price estimate to $40 from $22 for 2012, $35 from $22 for 2013 and $25 from $22 onwards after 2014. We believe the Mediterranean nations will split from the Euro, reinstating their former currencies, to create more monetary nervousness. Gold made its sixth straight weekly record and the 18th since mid-2010. Platinum made a three year high last week. Lead and zinc made all-time inventory records last week, while aluminum exchange inventories rose 244,000 tonnes in the past two weeks. We expect the World Steel Assn. and International Aluminum Institute each to report 4% July output declines in China due to power constraints later on August 22nd. Faithfully,
John C. Tumazos, CFA
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Copyright © 2008 John Tumazos Very Independent Research,
LLC
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