Editor's Note: The simultaneous rise in gold and the Japanese 10-year yield contrasts sharply with the weakness of Bitcoin. This article argues that this divergence reflects a shift in the market from "tightening trades" to "risk pricing," and the Bank of Japan's actions may be a key variable in disrupting the current pattern.
One of the most intriguing macroeconomic trends currently is the correlation between gold and the yield on 10-year Japanese government bonds. These two assets are fluctuating in tandem, which contradicts the norm during a typical monetary policy tightening cycle.
The following analysis will explain why gold follows the trend of Japanese yields, why Japan has become a key pressure point in the market, and the potential impact on Bitcoin if the Bank of Japan intervenes.
Gold and Japanese government bonds rose in tandem... but Bitcoin moved in the opposite direction.
In normal circumstances, rising long-term yields suppress gold prices by increasing the opportunity cost of holding non-interest-bearing assets. This negative correlation only breaks down when yields deviate from the market's normal trajectory and signal policy pressure. The recent surge in Japanese 10-year yields, coupled with a corresponding rise in gold prices, precisely illustrates this latter scenario.
This correlation chart clearly reveals this shift.
The blue line in the chart shows that while the 30-day correlation between the Japanese 10-year yield and gold still fluctuates, the duration of its positive correlation has increased significantly, rather than rapidly falling into negative territory. This alone indicates that the traditional inverse relationship is weakening.
More importantly, the 90-day correlation represented by the red line has risen accordingly, indicating that this is not short-term noise. The most convincing evidence is the 1-year correlation represented by the green line: it has steadily risen and remained in positive territory.
When long-term correlations turn positive and remain high, it often signifies a fundamental shift in market logic. Rising Japanese government bond yields no longer pose a resistance to gold; instead, the market interprets it as a pressure signal that gold is absorbing. This indicates that the market views rising yields as a risk signal, rather than simply a tightening signal.
What's even more interesting is that no similar phenomenon has occurred in other markets. During the same period, Bitcoin consistently maintained a negative correlation with Japan's 10-year yield.
The second correlation chart highlights this contrast.
While the correlation between Japan's 10-year yield and Bitcoin's 30-day and 90-day rates fluctuated dramatically as expected, the main activity remained below the zero line, reflecting Bitcoin's sensitivity to short-term macroeconomic pressures. Most importantly, the 1-year correlation (green line) has turned downwards and remains negative, indicating that over a longer time horizon, Bitcoin consistently faces pressure when Japanese yields rise.
In other words, for us to see signs of a sustainable rebound, we need the Japanese 10-year yield to begin cooling down – which, in theory, should also be reflected in gold prices.
How to interpret the current market logic
When gold and sovereign bond yields rise in tandem, the market is pricing in credit risk and balance sheet fragility, rather than economic growth or increased monetary policy discipline.
This pattern typically occurs when hedging demand outweighs arbitrage logic, policy control capabilities are questioned, and rising yields expose duration mismatches rather than suppressing economic activity. In this environment, gold no longer acts as an inflation hedge, but rather as a balance sheet hedge.
The inverse relationship between Bitcoin and Japanese yields reinforces this interpretation. The market views rising Japanese yields as a tightening shock, benefiting gold while Bitcoin has failed to do so; this current divergence is a key signal.
Why has Japan become a key point of pressure?
Japan is uniquely sensitive to this dynamic. The sharp rise in the yield on Japanese 10-year government bonds, as shown in the chart above, is by no means a neutral event for its domestic financial system. The key issue is not only the increase in yield, but also that the rate of increase has reached a statistically extreme value relative to Japan's own policy framework.
Using a rolling 10-year window, the current 10-year yield in Japan is about 3.65 standard deviations above its long-term average. This is equivalent to flipping a coin 13 times in a row and getting heads every time.
This is noteworthy in any market. In Japan, where long-term yields have been strictly controlled over the past decade, such volatility clearly indicates a loosening of the policy anchor. This is a typical characteristic of the collapse of the old order.
Equally important as the absolute level is the rate of increase.
The recent steep rise in yields has transformed a single interest rate change into a balance sheet event. Japan can gradually absorb higher yields, but it struggles to cope with a sudden and rapid repricing of duration within a financial system designed around yield suppression.
When yields rise sharply, the market is not only looking for a new equilibrium, but also putting a stress test on all participants who bet on the "unchanged Japanese model".
The structure of Japanese banking institutions, with their long maturities and deep holdings of Japanese government bonds as assets and collateral, inherently makes rapid yield increases inherently unstable, rather than simply restrictive. As yields soar, the value of bond portfolios shrinks, and the value of collateral deteriorates. Within a system clearly designed to suppress yields, financing conditions become increasingly tight.
This is precisely why the Bank of Japan has historically intervened when pressure manifests in the data (rather than after the market has normalized). The Bank of Japan does not need to wait for yields to reach absolute thresholds; accelerated fluctuations across multiple standard deviations are often sufficient to trigger action.
Therefore, the normalization of yields in Japan is not a simple market adjustment, but a balance sheet change that poses a real transmission risk to the banking system, especially in the event of disorderly or one-way market fluctuations.
The current trend in Japanese 10-year government bond yields has significantly increased the Bank of Japan's incentive to intervene. This intervention does not necessarily need to take the form of an explicit restoration of hard yield curve control. Verbal guidance, targeted yield smoothing operations, or relatively mild control over the long-term bond market may be sufficient to mitigate yield curve volatility and stabilize market conditions.
The impact of the Bank of Japan's intervention on gold
This particular pressure signal should weaken if the Bank of Japan intervenes credibly and regains control of long-term yields. This doesn't mean gold will suddenly turn bearish, but it could remove one of the key catalysts for the current rally.
Based on my analysis in last week's article "Commodities First, Bitcoin Follows," published on Delphi Digital, the gold chart has already hinted at this dynamic.
While the overall upward trend remains intact, the upward momentum is no longer expanding at the same rate. The recent rally has pushed prices to the upper edge of the ascending channel, but lacks the momentum confirmation seen in earlier upward phases. Even as prices gradually rise, the RSI indicator is struggling to break through previous highs, suggesting that marginal buyers are becoming more cautious.
This aligns with the current market sentiment, which is structurally bullish but increasingly reliant on policy pressure rather than broad participation. Gold benefited from the vertical rise in Japanese 10-year government bonds, but this benefit was more reflected in the sustainability of the price increase than in its acceleration. When major catalysts are expected to be resolved, price movements tend to shift from impulsive to consolidation-driven.
The Bank of Japan's decisive intervention is likely to break the correlation between gold and Japanese yields, reducing the pricing of policy pressure and perfectly aligning with the signals already signaled by the charts—the market is forming a local top or entering a consolidation phase, rather than a trend reversal. This outcome will allow gold to dissipate excess momentum over time rather than through price action, cooling the upward pace while maintaining the overall trend.
Gold is not structurally reliant on Japanese pressure for support, but it has clearly benefited marginally. If that pressure is contained, the charts suggest the market is poised to halt commodity trading.
The impact of the Bank of Japan's intervention on Bitcoin
Since Bitcoin's price movement is inversely related to Japanese yields and gold, this relationship should also become apparent when the Bank of Japan finally decides to intervene.
The chart has already hinted at this asymmetry: even as gold and Japanese yields continue to climb, Bitcoin, while weakening, shows signs of stabilization rather than accelerating its decline. This pattern aligns with the characteristic of assets bottoming out under macroeconomic pressures and remaining highly sensitive to any credible suppressive measures.
If the Bank of Japan intervenes, Bitcoin's reaction is likely to differ from that of gold. As global liquidity conditions stabilize and the impact of tightening long-term yields in Japan diminishes, Bitcoin may see a recovery rather than a decline. In this sense, Bitcoin is not competing with gold under this model, but rather acting as "digital gold" awaiting the easing of pressure signals.
in conclusion
The key insight is not that gold has peaked or that Japan is about to intervene, but that the market has come to regard Japanese yields as a global pressure signal, and asset price behavior is adjusting accordingly.
Gold is absorbing this pressure, while Bitcoin is reacting to it; this divergence is instructive. As long as the Japanese 10-year yield continues its unhindered climb, gold's strength is logical. If the Bank of Japan intervenes and regains control, the pressure premium in gold should ease, and the price trend may shift from accelerated gains to consolidation.
Regardless, the Japanese government bond market has become the clearest window into how the market prices policy risks and balance sheet vulnerabilities. Gold may continue its upward trend until the Japanese 10-year yield softens, while Bitcoin's price performance may remain weak.
