Barron:  “Despite some pullbacks, overall both the gold and silver markets have been moving up quite nicely.  All of your guests on KWN predicted this would happen because we knew the precious metals markets were deeply oversold.  We also knew the cost to buy both gold and silver had declined below the median cost of production. 

You can never have this situation going on for very long (metal below cost of production) because it puts the producers out of business.  But what we have really seen over the last couple of months is a massive amount of physical gold moving out of the COMEX and LBMA systems, out of the ETFs, and this gold has migrated to the strong hands in the East....

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“So this gold has gone out of the system and it is not coming back to the West.  This will have enormous ramifications for the gold price both in the short-term and over the long-term.  The tremendous amount of physical gold and silver has now been captured by other players, and these are not entities who are the ‘fast money‘ crowd.

These are Eastern central banks and people who are trying to preserve their wealth because they know what is coming.  The Chinese have been dumping large amounts of dollar holdings, and in the case of the Indian people, they are desperately trying to buy gold and silver in order to protect their savings against a falling rupee.

This morning, the rupee hit an all-time low against the U.S. dollar.  But nobody wants to hold dollars in India either, so as I said they are buying as much gold and silver as they can get their hands on.  We have also spoken about the thriving black market in India because of the enormous smuggling of gold that is taking place into the country.

The mainstream media is trying to paint this rise in the gold price as related to the conflict in the Middle-East.  That’s bullsh*t.  The Middle-East hasn’t significantly moved the gold market in decades.  But this is the job of the mainstream media -- to lie and deceive the public about why the price of gold is really rising.

If there is major conflict in the Middle-East, that could very well spike the price of gold and silver for a day or two, but I just don’t believe that situation is going to drive the markets in any sustained way.  The fundamental reason for the 12-year surge in gold and silver has nothing to do with the Middle-East.

It has to do with things like the U.S. just announcing it is going to hit the debt ceiling in October.  This is the real ‘trigger’ right now for gold.  We will see a great deal of propaganda about the two major political parties fighting in the U.S. over this issue, but this is all just a show.  They all shake hands and laugh behind the scenes when the cameras are turned off.

This will also serve to camouflage and distract people from whatever decision is made by the Fed with regards to the ‘tapering’ question.  There can’t be any significant tapering when the U.S. government is running out of money.  They will just up the debt ceiling, and that means more spending and more inflation. 

In fact, the price of oil trading near the $110 level is very inflationary for the entire global economy.  This is also very constructive for gold and silver prices.  This rally in gold and silver will have its setbacks from time-to-time, but, despite occasional pullbacks, I now think we are now well on the way to the old all-time highs for both gold and silver, and then we are going to take them out decisively on the upside.”

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Eric King

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