Even More On The Gold-Yen Link

As other outlets catch on to the gold--yen link, I thought we might discuss it a bit more today.

First of all, my apologies for sounding like a broken record. It is not my intention to beat this topic to death on a daily basis. However and for now, IT IS WHAT IT IS and we have to deal with it. Additionally, I am convinced that this persistent correlation might hold the key to finally stressing the paper---physical connection. GOFO rates in London fell even further in London today, making new 15-year lows in the process. This is always a sign of physical delivery stress and, to me, indicates that The Bullion Banks are having extreme difficulty sourcing metal to deliver at these noneconomically-derived paper prices.

And it continues to appear that we are seeing this stress play out in real time on the price charts. Notice that since last Friday, the paper price of gold has broken cleanly above the JPYUSD. It hasn't yet drawn completely way but it hasn't fallen back into complete overlap, either.

Apparently we're not the only ones who have noticed this, though I must say that it surprises me that so few have caught on. ZeroHedge wrote up a summary last night where they laid the correlation at the feet of the BoJ: http://www.zerohedge.com/news/2014-11-12/did-boj-quietly-peg-yen-gold

I don't agree with their conclusion as it grossly overstates the size and complexity of the Comex paper gold market. What I mean is...It doesn't take a formal central bank peg to link gold to the yen. Remember, "prices" are set on the Comex by just a small handful of HFT algo hedge funds trading against an even smaller number of bullion bank desks. If the majority of these computer-driven funds are programmed to sell gold with every downtick, gold is going to follow the yen. Period. No central bank intervention is needed.

And you've heard me state that although this gold-yen correlation came into prominence in 2008, it only really got sickeningly tight in June of this year. Want more proof of that? Then check out the next two charts...

First, here's three years of a similar linkage that I've discussed often in the past...the rational and economic link between gold and The Long Bond. Again, why is this rational? Lower interest rates make gold, which "doesn't pay interest and is a useless relic" more attractive. Note the clear correlation until...you guessed it, June of this year:

Now look at three years of the yen-gold link. Notice the same loose correlation until June 2014 and then, WHAM! Ever since they are perfectly 1:1.

So, why did this happen? What changed in June to prompt this break of the gold-LB and accelration of the gold-yen? Who can say for sure? Maybe ZH is right and the BoJ started running an operation in June in anticipation of the increase in QE announce two weeks ago. Maybe. All I know is that it clearly is what it is and until the paper---physical link causes the correlation to break, we will likely see gold move even lower as the yen moves lower.

To that end, read this. More from SocGen's Albert Edwards. This time, instead of forecasting the USDJPY rising to 120, he's now saying 145! YIKES!! If the gold-yen correlation doesn't break before then, what would gold be at yen 145? $900? $700?? http://www.zerohedge.com/news/2014-11-13/most-important-chart-investors-updated-edwards-sees-usdjpy-145-next-and-tidal-wave-d

Again, I don't think this will happen for two, primary reasons:

  1. The physical market will break from the paper price well before $700 gold.
  2. The Fed has to understand that global disaster that a 145 yen and an 80¢ euro would bring. I simply cannot imagine that they wouldn't act to malign the dollar if the POSX begins to even exceed 90, much less 100 or 110.

So, anyway, all of this is pretty crazy stuff but it's what we get since we've allowed all global markets to become such computer-driven shams.

I need to mention crude for a moment. We discussed in yesterday's podcast that the chart looked lousy and it appeared that another breakdown was coming. Well, we didn't have to wait long. Hot on the heels of another Saudi pronouncement (covert Russian sanction scheme), the price fell to new lows for this move at $75.43 and I have a last of $75.70. Though $75 can and will offer some support, I still think that the greazy stuff is headed to $70. So far, today's move has not dragged silver lower and this could be a growing sign of physical silver tightness...just like what we're seeing in the gold-yen growing divergence. We'll need to watch this closely, too.

Finally, here are some two-hour charts of the metals, for what they're worth...

That's all for now as I need to get ready for A2A within the hour. As usual, I'll post a recorded copy of the presentation shortly after it concludes.

Have a great day,

TF

77 Comments

Turd Ferguson's picture

And I need to address this

MODERATOR

We all first saw this story earlier this week:

http://www.zerohedge.com/news/2014-11-13/isis-unveils-its-new-gold-backed-currency-remove-itself-oppressors-money-system

Now, the "conspiracy theory" goes that despots like Hussein and Gaddafi were blown out because they threatened to step outside of the global banking order. Their gold was seized and "normalcy" returned.

OK. I'll buy that.

And now ISIS is minting gold and silver currency. Alright, they have to be destroyed, too. I'm still with you here.

However, can we now please dispense with the "ISIS is a creation of the CIA and Mossad" meme? Ask yourself, if this "ISIS gold standard" story is true, why would a CIA/Mossad created organization do it?

Sorry, I'm off the train on this one.

ISIS is simply a collection of really bad dudes who stepped into the vacuum created by an utter lack of American and world conviction to lead following the "end" of the Iraq War. Occam's Razor applies here. There ARE bad people in the world and they are NOT all the spawn of some plot hatched in the bowels of Langley.

b72s's picture

REad and in First

Stock indices grind higher and all physical assets get whacked what an upside down world!

Turd Ferguson's picture

And I might as well give you this now, too...

MODERATOR

When OBL was "killed" on May 1, 2011, I harbored VERY STRONG doubts regarding the official version of events. It all seemed too perfect...Kill the mfer, clean up his place and then dump his ass at sea. "Take our word for it", Woody said.

Well, guess what. Over the past two evenings, I found myself watching "The Man Who Killed Bin Laden" on Fox News. It was utterly compelling and the Navy Seal who was the focus of the story was 100% believable in his retelling of the incidents.

Now, of course, no one knows for sure and we all have our theories...this is the internet, after all. However, for me, this is case closed. OBL really did live in Abbottabad Pakistan and a team of US Navy Seals really did raid the compound and kill the mfer. Done deal.

Feel free to tell me all about how these are just actors spewing propaganda in order to make clueless rubes like me believe the entirely fabricated story. If that's the case, then "they" did their job. I watched the program and I found the accounts of the Bin Laden raid utterly 100% believable and authentic. Again, for me, this is case closed. Take it fwiw.

J.P. Cubish's picture

OBL et al.

Oh Turd, your too sensible.

btcgoldbull's picture

Interesting possibility

The last time we had a sell off in stocks the bond market broke (10/15). Wouldn't it be interesting if the new asset class that gets the 'flight to safety' bid was gold?

Turd Ferguson's picture

And I forgot to add this

MODERATOR

Everyone please check this out and see if we can help Peter with his project:

Hi, I'm Peter Forth, I'm a software developer and loyal Turdite.  I follow the price of silver and gold every day and I'm constantly making guesses as to what it's going to do next... Is it time for a waterfall attack?  are they going to cap it for the rest of the day? Is today going to be a day where we hold the manipulators at bay?  So for a long while I've been working on a way to record my thoughts and my predictions in a way where I can gauge my accuracy and learn to improve upon it.  What would also be great is that if a community of people could be built who could do this and perhaps together we could "crowdsource" upcoming price movements.  The sum of our guesses would surely be better than what any one individual could do.

What I've built is basically a mash-up between a comment board and a stock chart.  The start of this project is now in beta and ready for people to poke around with at http://www.chartchatter.com

The site is still very new of course and will likely have a few rough edges but I'd like to encourage you to sign up and give it a look.  Any suggestions or comments on the site would be greatly appreciated.  Even better, I hope you'll find putting your predictions in as fun as I have for the last few months.....

jonesmw's picture

ISIS and gold

The Islamic world has a long history of appreciating gold, so it would seem natural that even a terrorist group would eventually want to use it as money.  On the other hand, I can't think of a much better way to demonize gold and silver than to associate it with evil folks.  The next step might be to associate the love of gold with radicals (those who don't quite see things the same as the mainstream group-thought), which then just might require more surveillance of those not in the mainstream and greater overt control of the metals as part of the "war on terrorism."  

galen313's picture

@Turd

I would say since the CIA is in league with the banking cabal that ISIS starting to use gold and silver completely goes along with the ISIS is a NWO government controlled entity theory.  What better way to denigrate PMs when the current irrational fiat system and gold suppression ends than to blame it on ISIS.  Americans would buy it was all the terrorists fault plus it paints us gold bugs by association as supporting the demise of "the way of life as we know it".    Also deflects blame from the mess they caused.  Also allows for the expansion of American war interests in the Middle East.   I would actually say ISIS getting involved in physical metals before a "collapse" or repricing fits the globalists and bankers agenda to a T.  The exact opposite of what you mentioned!

Bollocks's picture

"ISIS gold standard"

"if this "ISIS gold standard" story is true, why would a CIA/Mossad created organization do it?"

Perhaps to connect any discussion of returning to a gold standard with terrorism.

"That's what terrorists do. You're a terrorist"

matt_'s picture

Conspiracies

I was a big Ron Paul supporter in 2012.  My campaign donations got me a ticket to have lunch with Ron Paul himself.  Had my picture taken with him, and I got him to sign my copy of Liberty Defined.  I wasn't seated at Ron Paul's table, but the next one over.  My table was full of supporters only, no one from his campaign.  Lunch conversation drifted from the campaign to conspiracies.  Agenda 21, WTC7, OBL, etc.  The people at my table were fairly accomplished professionally in diverse fields, and rational reasonable people.  They all questioned the official narrative about everything.  I know it was a biased sample of people, but they had valid reasons to be skeptical about a lot of things.

That campaign really opened my eyes to the coordinated lying of our main stream media.  I attended a rally that completely filled a stadium.  People were turned away by the fire marshal.  I saw it with my own eyes.  There was ZERO coverage of this event in the main stream media, while sparsely attended Mitt Romney events received wall to wall coverage.  In the end, I have no idea what the heck to believe.  In general, it isn't Fox News.

Adam Smith's picture

OBL etc.

Turd,  

IDK if the OBL "Official Story" is true or not.  However, if it is true is not the Seal and those who gave him orders guilty of murder?  OBL was not convicted of any crime nor did he ever admit to any crime.   In a nation of laws, how is that not murder?  John Grisham's A Time To Kill comes to mind.  In that story a man's young daughter is raped and he kills the accused rapist before the rapist's trial.  He is tried for murder.  Maybe this belongs on another thread, but this has always troubled me about the whole OBL matter. 

Smith

tmosley's picture

Turd: The CIA created Castro

Turd: The CIA created Castro too.  And UBL.

This almost always happens, it's just that they are rebelling sooner than usual, more Castro and UBL.

Adam Smith's picture

ISIS Gold Standard

This is a great point.  The same thought occurred to me.  There is some relationship here to the broader "bash gold" agenda.

Smith

Wizdum's picture

The isis gold thing... a tool...

to ban all gold trade

i hope not

the fiat evil monetary system must end

Chord's picture

Re-Set Redux

During the brouhaha (ha ha) over the re-set of the TFMR web site, I was surprised at the strength of the reactions of some active members.

Here we discuss the End of the Great Keynesian Experiment and by implication the End of the World as We Know It… and some are seriously upset by changes on their favorite web site?

How are they going to react when things really go bad for real, in the real world?

Gut check time is coming for us all.

I also wondered if it would have been better to open the potential changes up to general discussion by the vault members, but now I think such a discussion would have led to paralysis and delay.

The first evolution hinged upon the hacking attacks of 2013 and led to the pay wall, but that did not solve the problem of disruptions caused by a few posters, whatever you choose to call them. They were making the Main Street of the site into something it is not intended to be, and definitely needed to be dealt with.

However, a clean read-only Main Street devoid of comments looked and felt bare and lifeless, and suddenly TFMR was effectively split in half between the Vault and the Forums, each of which have very different “personalities” if you will.

What would motivate a new visitor to subscribe to the Vault without being able to catch a tiny glimpse of what is going on in there beyond the post's header?  If they could not even peek inside, why pay to step up?

I suspect that the vast majority of subscribers are previous members of the free versions of the site, and even some of those needed to be enticed inside with a free pass for two weeks. (Who, me?)

So I believe the real importance of “Vaulters Only Posting" on a restricted Main Street is that it will give new visitors to the site a one-way window into some, but not nearly all, of the benefits of Vault membership. This is the only way they will get an idea of what they are really missing.

It should give them a feel of what it is like inside the Vault, as opposed to just the chaotic Forums, and generate new memberships that otherwise simply would not exist.  After all, if the site is to thrive it will need new blood, and enough new blood to thrive will most likely not come from the forums alone.

So all in all, the re-set should end up being very beneficial to the site and the members.

Looking forward though, this battle is not over.

Some of those who were very determined in their malicious desire to mess with people and disrupt the site evince behavior that is psychopathic in nature. I believe some will actually spend the fiat to join, and continue their efforts from the inside.  

Prepare accordingly.

NW VIEW's picture

O.B.L.?

Most are really not concerned about the past event of OBL meeting his maker and how it happened.  We might as well talk about what really happened to Norma Jean.  These are just side issues that will not change anything even if we know the truth. 

Well, there are issues that really come home every day that are bigger issues. >>>>>>>>How will Craig's children deal with their losses of friends over the coming months, who will feed grandma when the social security checks dry up,  how will the boomers pay their property taxes and be able to live in their homes, where will the college grads obtain real employment, what will happen when the inner cities have riots and the food supplies are gone, what will our savings look like if bail-ins appear in our local banks over a future weekend, what will you do if ISIS  pulls out AR's at your local mall, and what will we do if all these things take place and our own bugout bag, internally and externally, is not full to the brim of both the physical and spiritual?   

Dr. P. Metals's picture

the only thing that stuck me watching the seal

on TV was how perfect a storyteller he was. hand picked it seemed. I'll ask my ranger friend who I'll see today at lunch. He's been shot at point blank ,and still doesn't know how he's here today...so he's seen this crap up close, white of the eyes close.

tyberious's picture

ISIS

Where did they: acquire, store, mint and design these new coins and blanks?

Pseudozero's picture

why is it?

i'm getting ads for silver maples when i'm on youtube.  from the royal canadian mint no less!?!?

you'd (i'd) think they'd not be actively marketing precious metals right now, both because of current prices, and general perception. it seems to go against the narritive of keeping this situation quiet, and keeping the 'real' assets from the populace.

i'm as firm as ever against keyensianism, and fiat, but sometimes it sure feels like we're just being duped.

OhioSunnyDay's picture

Navy Seal

Mickey's picture

we devalauate

all along the various countries are trying to find ways to competitively devaluate. our turn coming soon. Unless we actually have a strong dollar policy

ag4me's picture

silver maple ads

I also saw that ad but I believe if you watch right to the end you will find it is sponsored by silvergoldbull.com. 

AlienEyes's picture

ISIS Weapons

I'm not quite ready to call the CIA blameless for the present state of affairs. After all, they did provide weapons to ISIS as ordered by the commander and chump.

lakedweller2's picture

I don't even watch this stuff

I'm concerned that I will never know the truth about anything.

pforth's picture

ChartChatter...

Thanks for the intro Turd!  If anyone has any questions on my site (http://www.chartchatter.com ), please let me know.  I'm excited to see if we can pool our resources and crowdsource upcoming cartel hits.  I've been doing predictions myself for a couple of months and some of them are pretty good: http://chartchatter.com/chart/SILVER/pforth/353 but I know as a group we can do better.  You can email at pforth@chartchatter.com

nadgeskaul's picture

Gold and Silver to the Black Market

Does anyone share my sentiment in that the precious metals may eventually go underground in an "illegal" black market shift, where citizens use it as barter outside the scope of big government and central planners?

It could very well be outlawed at some point as confiscatory efforts are made.  At that point, the populace will be well aware of it's inherent value and it would be coveted as money and a store of purchasing power.  In this case, the aforementioned government and central planning devices would label the "value" of PMs to near zero via use of their broadcasting techniques to help dissuade usage. 

It could become illegal to own, but more valuable than anything else on earth within commerce. 

Are we already on this path?

realitybiter's picture

Lets treat Fox News

as if this is a court case.  For me the witness lost all credibility and therefore anything further seen or heard became utter, misinformational Bravo Sierra.  Come on.  This is Charlie Brown and Lucy playing football.  Over and over and over.  Propaganda.  Do they tell the truth sometimes?  Sure.  Always?  Can you trust them?

In this incident, they took footage from the year before, completely out of context, and made it seem as if it were the current year.  No mistake.  Intentional propaganda to discredit a legitmate Winner.  It was so bad, that even Jon Stewart was making fun of the medias BS.

or this

AJ is likely right, Foxnews is nothing but the neocon news.  Anything to whip up the war drums.  Some on...this is not conservative.  "foxnews treats its viewers as if they are absolute and total morons....it is disgusting...."

Do some research on Charlie Vaughn, who lost his SEAL son in the bizarre helicoptor crash called extortion 17....

If you want to expand the proaganda, listen to the so called otherside.  In 2007 the media flipped from Hillary and gave you Obama, just like Fox crushed Ron Paul and made you think, "Mitt Romney would be best"

Which is why I think the media is all BS and my only choice is to ban them.  Quit paying your cable bill.  You are financing your own demise, imo.   

Turd Ferguson's picture

Again,

MODERATOR

All we can do is agree to disagree. NO ONE knows the truth on these matters. Just because you read it on the internet or I saw it on TV does not make it true. We are all dealing with our own opinions and conclusions.

What I am saying is that I finally find the Seal Story to be believable. That's my opinion.

Yukajub's picture

re: Gold and Silver to the Black Market

I sure hope not. That MadMax scenario is painful/inefficient and likely still need a medium of exchange other than PMs. 
I hope (and I know hope is not a strategy) that PMs is a way to get from one fiat to another as a store of value. I'd prefer not to see the world go through complete hell first.

- Yukajub.

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