The web is buzzing with rumors surrounding a supposed price drop for the Xbox 360.

The rumors began late last week and have snowballed since. On Friday, several publications printed what was allegedly a scanned Kmart advertisement featuring a new low price for the Xbox 360 20 GB Pro Edition. On the same day the Hollywood Reporter claimed a major retailer revealed (under a cloak of anonymity) that the next few weeks will see Microsoft drop the price of the 20 GB Pro Xbox 360 $50, bringing it down to just $299.

The reports were reinforced on Monday by Joystiq, which published a scanned Radio Shack ad it claims was sent by a Radio Shack employee. Both the Kmart and Radio Shack ads are supposed to launch on July 13th, just a couple of days before the E3 Conference and one day before Microsoft’s E3 press conference,

Similar rumors were flying around the internet around this time last year and there was indeed an Xbox price cut in the works in that instance. In August of last year we saw the price of the Xbox 360 Pro drop from $399 to $349. While that price cut was not a special offer for a limited time only, there is speculation that this summer’s reductions could just be a blitz sale to get rid of stock.

Ars Technica reporter, Ben Kuchera said yesterday that a “usually trustworthy source” emailed him and said that not only is the price drop going to happen, but said price drop is to make room for a 60 GB version that’s on the way.

The rumor mill has certainly kicked itself into overdrive and a lot of people are inclined to believe that Microsoft will announce the new 60 GB version at E3. Stay tuned for developments.