Two months ago we showed, and explained in great detail, how in the new normal the role of gold is nothing more than a funding "currency" to allow the BOJ to sell Yen against it (on a borrowed basis, which is also why the LBMA halted reporting its GOFO data as of the end of February, as it would not be pleasant for the central bank cartel to demonstrate just how much institutional gold shortfall there developed following major BOJ interventions). So for all those who are curious what it looks like when the BOJ "enters the house", here it is... Gold and USDJPY... peculiarly linked once again... And where USDJPY goes, US equity markets are ignited... As we detailed previously, it’s a clever trade from a cynical perspective... A number of unpleasant ironies are immediately apparent: It is helping to drive up equity prices in the country with the most rapidly expanding credit bubble and credit bubbles don’t tend to have happy endings; It is simultaneously driving down the price of the ultimate safe-haven asset and thereby silencing price signals relating to market and financial system risk; It appears to be a leveraged trade, obtaining the leverage via ultra-low rates in the repo market. The latter is a source of systemic risk which is known to regulators but remains unaddressed; and The logical conclusion is that risk across the world’s financial system is even more under-priced than market participants realise and many believe it is woefully under-priced. We are in a global credit bubble in which the multi-trillion dollar expansion of central bank balance sheets, their imposition of near zero (or even negative) interest rates and control of entire yield curves (directly or indirectly) are at the cutting edge. This has encouraged more and more speculation in risk assets which, in many cases, is being enhanced by leverage and without a commensurate sense of heightened risk. Japan is the “cutting edge of the cutting edge” of this expanding global credit bubble. * * * The coincidence of course is that there appeared a miracle bid in the JGB auction last night after the previous two auctions were dismal failures. It seems that confidence-inspiring 'management' has spilled over into today's US equity markets... how else do you explain the ramp this morning on absolutely no news whatsoever and Grexit ever closer?