Barron: “We had the gold and silver prices take a dive a couple of days ago when a Fed governor in Chicago made some noises about the Fed potentially tapering QE.  But we are already seeing gold and silver rallying again.  The reality is that the stock and bond markets will crater if the Fed gets serious about tapering....

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“This is a situation that is very fragile right now and so I really do not think that the Fed can stop buying $85 billion of Treasuries every month.  So the QE will continue, but at some point I think it will have to be augmented. 

As I said in my last interview, the American economy should be booming right now considering all of the money that has been pumped into it, but instead we have seen a lackluster response to all of the money printing.  At this point the central planners are very afraid of things beginning to shift toward deflation, recession, depression, etc.”

Barron also added:  “There are a number of interesting things taking place right now, especially in the junior space.  We are seeing a tremendous amount of merger and acquisition activity in the junior sector.  This is not something that Bloomberg reports on very much because we are talking about micro-cap companies in the gold and silver space.

This M&A activity is now happening on a daily basis.  We are talking here about juniors gobbling up juniors, so this is very interesting right now.  We are also seeing a lot of insider buying amongst the management of these juniors.  I am expecting a big bounce in the sector after Labor Day.  This is something KWN readers should be expecting to see. 

The gold and silver prices are not going to stay down where they are for much longer.  When you look at the high quality junior companies, we are seeing bargain-basement prices.  This is why the executives, who are in the know, are buying their own shares.

The other thing we are seeing right now is the revival of hedging.  It’s really the investment bankers who are driving this hedging.  They are not lending money out unless the companies are willing to hedge.  The problem is that these companies are going to be selling their forward production at dirt cheap prices and losing out on what I think are going to be massive price advances in both the gold and silver markets.

I strongly believe that we are going to have very big upward movements in gold and silver prices in the third and fourth quarters of this year.  There will be some sort of major event, a failure of a large bank in Europe, a default in bonds by one of the PIIG countries, a terrorist attack, or some other disaster that will trigger massive advances in gold and silver.

All I know is that this ‘trigger’ which is going to ignite this move is coming, and it will involve substantial repricing of both gold and silver.  One possible trigger may turn out to be a failure of the COMEX.  We do know that there is a shortage of physical gold for delivery, and that’s because so much gold is going to Asia right now.

You can see by the price action in the U.S. dollar right now that the Asians are dumping their dollars.  But, interestingly, they are also paying a premium to get physical gold right now with no delay in shipment.  So there is a loss of faith in the paper gold and silver markets by major participants.  It’s almost as if they expect a failure.

We are seeing a situation in the aluminum market right now where end users such as Coors (the beer company) are having trouble getting the product (aluminum cans) to package their product.  So this is focusing market participants now on warehousing certain metals.

I firmly believe there will be a point in the future when this sort of event triggers a run on the COMEX, and more and more entities are going to ask for physical delivery.  This will have the effect of breaking the COMEX and creating a failure.  When that takes place you will see an explosion in the prices of gold and silver that will literally shock market participants around the world.”

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Eric King

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