The Euro pushed back towards $1.31 today while the U.S. Dollar weakened versus the Japanese Yen.  Yen strength means dollar weakness across the board as we saw all inflation assets move higher.   Gold, up until recent months, had been strongly correlated with the Euro/Dollar cross but that relationship has broken down with the rise of Abenomics in Japan.  The Yen has created synthetic dollar demand which has helped drain liquidity from the gold and inflation-associated commodity complex.

If gold and silver are weak due to a stronger dollar, then oil and copper will generally follow.  The yen has knocked a number of times not on ¥100 and failed every time.  Traders just are not comfortable with pushing it up through that level without another shock to the system.

Without that shock I would expect these currencies to remain in their current ranges with the yen pushing as low as ¥95 and the euro range bound between $1.30 and $1.32.  Every day we get a little closer to Draghi and the ECB opening up the money spigots despite the current reprieve in Italian and Spanish debt yields.  But if the yen is not pushed higher eventually that trade will unwind as the stresses within the Euro-zone become more pronounced later in the summer.

Expect gold to continue to gain a strong bid because of physical demand in the face of all of this uncertainty and the official clearing out of €4.3 billion from the stricken Cypriot bank, Laiki.  At this point I would not be surprised by an increase in physical demand once the price breaks through $1500 as mania could set back in.