The key to understanding how the Federal Reserve has been able to keep the price of gold under control for the past six months during all of this QE has been to look at the Japanese Yen.  I might be smarter than the average bear but sometimes it takes a village to figure out why the markets continue to act in ways that make no fundamental sense.

The historic devaluation of the Yen has created the bifurcation between the physical and securitized gold markets that looks like it has just about reached its limit since the Yen cannot break above ¥103 with any gusto and Japanese bond yields have risen back to a real yield above zero a kind of stasis has begun to form in the FX markets which is now beginning to manifest itself in a rising gold price.

With the hedge funds now no longer getting cover from the BoJ trashing the Yen and depleting dollar supply as often the pressure that has been building in the physical markets can finally express itself as there is no longer enough momo monkey chasing gold lower with naked short positions thanks to the Kuroda Put.

Hence, the news this afternoon that Japan will be tightening up the margin rules in the FX market cut the wind from the sails of the gold bears and allowed gold to not only bust through $1400 but take out the more technically significant $1413 level all in one session.  Watch for a quick strike back to the $1480 area.  If we get follow through into tomorrow’s close to $1445 or higher that would be a two-bar reversal signal on the weekly chart and a 2nd monthly close above $1440 on the monthly chart.