Strong Linkage Between the Yen and Gold Breaking Down for First Time in Over a Decade

Strong Linkage Between the Yen and Gold Breaking Down for First Time in Over a Decade

The Yen and gold have tended to broadly trade in lock-step fashion since the latter’s secular lows in the early 2000s.

If deviations have appeared in that pattern the Yen has appreciated or depreciated rapidly to make up the difference vs. gold, in some ways making the latter a leading indicator of the former, per (A)-(C) in the chart  below.

However, look at the large deviation that’s opened up at (D).

It sure does look a lot different than anything else on this chart as gold’s calm demeanor contrasts greatly with the Yen’s recent straight-line move lower.

Is the linkage broken, is gold about to begin a new move higher with a major reversion higher with the Yen to follow or have the roles of leading vs. lagging indicator simply reversed?

It’s worth trying to figure out as it seems that both of these assets have a ton of informational content value when it comes to understanding other important global macro trends that are afoot.

2013-02-05 Yen & Gold - Weekly