The relationship between the Yen and Gold prices could not be more clearly delineated than it was during today’s trading.  The Yen began strengthening versus the dollar early after 9am and with that took the price up gold up quickly back to $1415 per ounce where it bounced around for the rest of the day.  The Yen hit a low of 99 and quickly backed off that level which capped the gold price for the rest of the afternoon.  This action, however, should confirm that for now, at least, the Yen is not going to be shooting up past 105 and causing even more unrest in the FX markets.

Also, the Euro gained today as well, pushing back near $1.31.  And it looks like this is the range for the time being in all of these instruments.  The Euro looks comfortable between $1.28 and $1.31 while the Yen may retreat back to 95.  If it does that will likely light a fire under gold taking it back near to $1500 per ounce.  But, as a first trading day in June for the Yen to follow through so forcefully after last week’s bearish close sets up a pretty high probability of a violation of May’s low at 97.03.  If that occurs there then the BoJ will have successfully managed to stabilize the currency below 105 and avoid a hyperinflationary collapse.

Gold needs a weekly close above the May 11th high of $1448.05 to truly put in a technical reversal.  First besting last week’s high is the order of business.  With the Yen retreating the odds of that are far higher than before as synthetic dollar demand through Yen debasement is removed as a stimulant for gold selling.