Jim,

I agree. The time for a top in gold and a bottom in the dollar is all wrong. Multi-month trend consolidations do not end weeks after the breakout. The 2006-2007 trend consolidation lasted 16 months. The resulting breakout produced a powerful 7-month, 35%+ rally from the breakout. In comparison, the 2008-2009 consolidation lasted 19 months and was significantly more volatile. As a result, the corresponding breakout from 10/06/09 should be greater in both duration and magnitude than the 2006-2007 breakout.

CIGA Eric

Jim,

While price closed below the breakout gap yesterday, it did so on -19% decrease in volume. This implies a false breakdown. I expect gold and gold stocks to chop as the dollar setups up, but nothing has changed here.

CIGA Eric

Click chart to enlarge in PDF format

^[1]

Jim,

I’d hate to be on the wrong side of this trade when the orderly decline becomes disorderly.

CIGA Eric

Click chart to enlarge in PDF format

^[2]

Jim Sinclair’s Commentary

Thank you Mr. Williams.

This has to answer at least half of this morning’s count of 537 emails.

- Fed Pushes Monetary Base to Record High 
- Recession Not Over Despite a Positive GDP Quarter

You should really subscribe to www.shadowstats.com ^[3].

Gross Domestic Product is anticipated at 3% plus which is anticipated as dollar positive. However, most commentary so far is, as above, correct in the observation that Cash for Clunkers and tax credits for first time home builders was the primary causes responsible for the improved statistic in manufacturing. With that behind us the dollar benefits in the form of short covering should be completed.

This leaves us with exactly what we have been dealing with since $248 in gold. The price of gold is all in the condition of the US dollar in the inverse.

Fundamentally there is little upside to the US dollar so therefore it is also contained by Chinese buying and the fact there is no major downside for the gold price.

Jim,

Roubini says we are in ‘Huge’ Asset Bubble.

Is it possible to time the pop of this asset bubble? Do you think this bubble can continue beyond 2009? Can the spark come from anywhere? At which type of event do you look most, now? Financial? Geopolitical? Political?

Regards,
CIGA Christopher

Roubini Says Carry Trades Fueling ‘Huge’ Asset Bubble (Update2)
By Michael Patterson

Oct. 27 (Bloomberg) — Investors worldwide are borrowing dollars to buy assets including equities and commodities, fueling “huge” bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini.

“We have the mother of all carry trades,” Roubini, who predicted the banking crisis that spurred more than $1.6 trillion of asset writedowns and credit losses at financial companies worldwide since 2007, said via satellite to a conference in Cape Town, South Africa. “Everybody’s playing the same game and this game is becoming dangerous.”

The dollar has dropped 12 percent in the past year against a basket of six major currencies as the Federal Reserve, led by Chairman Ben S. Bernanke, cut interest rates to near zero in an effort to lift the U.S. economy out of its worst recession since the 1930s. Roubini said the dollar will eventually “bottom out” as the Fed raises borrowing costs and withdraws stimulus measures including purchases of government debt. That may force investors to reverse carry trades and “rush to the exit,” he said.

More… ^[4]

CIGA Christopher,

It is all in the US dollar. Pop anything and you Pop everything.

Jim