Dan Norcini continues:

“Soybean prices are making record highs, corn is making record highs, and wheat has soared.  The impact of these higher grain prices is going to be with us for quite some time.  So you have rising food, rising energy, and now we are seeing a breakdown in the bond market.

Bonds have made a low going all the way back to May.  So we are definitely seeing a very important and major shift here....

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“There are increasing fears about price increases.  We may be getting away from the deflationary scenario, and the very real fears of slowing global growth, to what’s going on with prices now.  If food and energy prices head higher, along with bond yields, that signals a shift, finally, to the onset of significant inflation.

If that turns out to be the case, investors will need to keep an eye on silver.  Silver will actually lead gold higher in that environment.  We could very well see silver ignite to the upside.  And of course gold will have a strong response as well. 

This is the type of scenario that can take both the gold and silver markets right out of these long consolidations and into a trending move to the upside.  The first thing we need to see is a strong weekly close on gold above the $1,640 level. 

Above $1,640 you are going to see a great deal of short covering from the speculative camp because there is still a significant speculative short position in gold.  Those shorts will start to panic and cover if we see a weekly close above $1,640.  This will also bring in the momentum crowd, which would only exacerbate the panic for the shorts. 

Remember, Eric, when we see gold break decisively above $1,700, it will move quickly and violently to $1,800.  We have spoken very recently about the massive Chinese buying in the $1,500’s.  This buying rebuffed all of the bears attempts to break the gold market below $1,500. 

There came a point where the sovereign buyers actually started raising the level of their buy orders.  At that point we began to see a series of higher lows in gold.  We also chronicled the structural changes on the COT which were extremely bullish for both gold and silver. 

We saw the swap dealers become net longs, and quite frankly this really should have been a red flag for the shorts.  Now we also know that billionaires Paulson and Soros were adding to their respective gold stashes during that time period.

The bottom line here is we have a combination of bullish indicators that may very well signal the gold bears are going to be crushed and overrun.  This is the type of environment where we may see a major move to the upside in both gold and silver.  The real shock for market participants will be if this move takes place during the typically sleepy month of August.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with Egon von Greyerz, Bill Fleckenstein, Keith Barron, MEP Nigel Farage, Peter Schiff, John Embry and James Turk are available now.  Also, be sure to listen to last week’s line-up of other KWN interviews which included Micheal Pento, Dr. Stephen Leeb, and John Hathaway by CLICKING HERE.

Eric King

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