All Abe-Inspired "Gold-In-JPY" Buyers Now Underwater

Tyler Durden's picture

Japan is opening ugly - the commodity rout continues with rubber, gold ($1325), and copper all down hard and stocks also being hit as liquidations continue. JGBs are modestly bid 1-2bps (though fading). JPY's bounce off the after-hours spike is fading...

JPY was its strongest at the start of October - and then the new Abenomics plan began. Very quickly the "long of gold in JPY terms" trade became extremely popular. After an impressive 16.4% rise into mid-February, gold-in-JPY corrected modestly; but the BoJ-inspired action smashed gold-in-JPY back up to its recent highs (helped by the seeming capitulation is JPY longs on the bigger-than-expected QQE). This appears to be the last straw on this trade. With JPY shorts so extremely positioned, the small rally on Thursday/Friday in JPY sent many scrambling to cover and, along with the need to unwind any and every asset to cover cash needs for JGB volatility, the avalanche began in gold-in-JPY. In 2 days, the entire Abe-inspired 'rally' in gold-in-JPY has been undone and all post-Abe buyers are now underwater. Whether this marks a short-term capitulation of these positions is unclear but CTFC CoT this week will be intriguing - and further JGB vol will not help. The rally in JPY of the last two days is the largest in 35 months - so someone clearly broke something...

Gold in JPY has retraced all its post-Abe gains...

It would appear that it is no longer moving from the lower left to the upper right...

and JPY is rallying faster than it has in 35 months...

 

and Gold is plunging on the Japanese open (as margin calls flush a few more out)...

 

Japanese interest rate volatility is surging higher and gold is being sold to match it still (as we discussed here)..

 

Something broke when the BoJ went full retard...

 

Charts: Bloomberg