Money Flow Trading Method along with Risk Management

https://www.bullionstar.com/gold-uni...che-bundesbank

Snippet: THIS IS EXCELLENT RESEARCH INFORMATION SO IF TOO LONG TO READ THEN JUST PASS BY IT !!!

Thanks

Deutsche Bundesbank
Introduction
Germany’s central bank, the Deutsche Bundesbank (German Federal Bank), holds the world’s second largest official gold reserves, with claimed holdings of 3381 tonnes, stored over four locations. Of all central bank gold holders, the Bundesbank has probably generated the most interest and attention over the past few years due to its substantial and long drawn out repatriation of a large amount of its gold from storage sites in New York and Paris to storage at its own headquarters in Frankfurt, Germany.
Contents

1. 1. Introduction
2. 2. Gold Reserves – Ownership
3. 3. Gold Storage Controversy – Federal Auditors
4. 4. Initial Bundesbank Gold Repatriation Plan
5. 5. Bundesbank Gold Storage Distribution – December 2011
6. 6. Second Gold Repatriation Program
7. 7. Inability of the Bundesbank to produce a Gold Bar List
8. 8. Secret Gold Repatriation from London to Frankfurt: 2000-2001
9. 9. Valuation of Gold Reserves
10. 10. German Gold Coin Minting Program
11. 11. Audits of the German Gold
12. 12. Gold Storage in Frankfurt
13. 13. References and Links

Highlights

1. Deutsche Bundesbank holds the second largest central bank monetary gold reserves in the world and values these gold reserves at market prices on its balance sheet where they constitute over 60% of the central bank’s official foreign reserves.
2. These gold reserves are owned by the German State and are merely held and managed by the Bundesbank.
3. The Bundesbank has the dubious distinction of initiating a gold repatriation program that has been widely ridiculed for its excessive length, and that has pressurised other central banks to follow suit.
4. Deutsche Bundesbank was only able to repatriate an embarrassing small 5 tonnes of gold from New York in 2013 and this even had to be melted down and recast. Of the Bundesbank’s 85 tonnes of gold repatriated from New York in 2014, 50 tonnes of that gold also needed re-smelting.
5. The Bundesbank is extremely secretive and non-cooperative in sharing with the public any real information about its gold holdings such as industry standard gold bar weight lists.
6. The German Federal Court of Auditors has been highly critical of the irresponsible way in which the Bundesbank historically never audited the German State’s gold reserves held abroad.

Gold Reserves – Ownership
Ownership of Germany’s gold reserves resides with the German State. The Deutsche Bundesbank officially acts on behalf of the German State in storing and managing these gold reserves:
“The Deutsche Bundesbank holds and manages the national foreign reserves of the Federal Republic of Germany”[1]
“The Bundesbank holds and manages Germany’s gold, which it keeps in storage with four custodians worldwide, as part of these reserve assets.”[2]
Gold Storage Controversy – Federal Auditors
In 2012, it became public knowledge that the German Federal Court of Auditors, the Bundesrechnungshof, was critical of the Bundesbank’s oversight of storage arrangements for that portion of German gold reserves which were stored abroad at the vaults of the Federal Reserve Bank of New York, the Bank of England and the Banque de France. The German Federal Court of Auditors (FCA) is an independent judicial institution whose powers derive from the German Constitution, and which is responsible for financial management of the German State. In its 2011 confidential audit of the Bundesbank, the Bundesrechnungshof specifically took exception to the lax way in which the Bundesbank merely relied on annual written statements from its foreign gold custodians about Germany’s gold holdings. The Bundesrechnungshof was also critical that the Bundesbank did not conduct any physical audits of its gold stored abroad[3].This confidential audit report was first passed to the finance committee of Germany’s parliament, the Bundesstag, and following this, a redacted version of the report became public in October 2012[4][5].
Due to the Court of Auditors’ critical report, the Bundesbank was forced to issue a statement[6] in October 2012 in which it attempted to defend the lax procedures that it employed in auditing its foreign held gold, and in which it stated such platitudes as:
“The integrity, reputation and security of these foreign depositories are beyond reproach.”
“There is no possibility of confusion or commingling with the holdings of other parties.”
“There is no doubt whatsoever that the institutions acting as the Bundesbank’s depositories have the very highest of reputation and credit rating.”
However, the same Bundesbank statement also promised that:
“the Bundesbank will take up suggestions by the FCA wherever possible”
“the Bundesbank will have part of its gold reserves reviewed and verified in future, too. This could also involve relocating part of the holdings.“
Initial Bundesbank Gold Repatriation Plan
In a report, dated 22 October 2012, the same date on which the Bundesbank released the above statement, German newspaper Der Spiegel reported that the Bundesbank had agreed to transport 50 tonnes of gold from the Federal Reserve Bank New York each year for 3 years, in order for this gold to “undergo a detailed examination” [7].
The Federal Court of Auditors report therefore appears to have been the triggering event for the initial (and subsequently altered) gold repatriation program that was first promised by the Bundesbank in October 2012 (Plan A).
Arguably, the gold repatriation program was put in place in reaction to the criticism from the Court of Auditors purely so as to appease a number of parties including the Court of Auditors and German lawmakers, the German public, the German financial media and a number of German citizen groups that had already at that time been lobbying for repatriation of Germany’s gold reserves.
Bundesbank Gold Storage Distribution – December 2011
As of the end of December 2011, the Bundesbank claims to have held 3396 tonnes of gold stored over 4 storage locations as follows: 1036 tonnes at the Bundesbank in Frankfurt (31%), 1536 tonnes at the FRBNY in New York (45%), 374 tonnes at the Banque de France in Paris (11%), and 450 tonnes at the Bank of England in London[8](13%).
https://static.bullionstar.com/gold-...ld-300x121.png
Bundesbank gold storage locations as at December 2011. Click image to enlarge

As of the end of 2012, the Bundesbank claims to have held 3391 tonnes of gold[9], stored in the same 4 locations and in the same percentage distribution as in 2011. The reduction of 5 tonnes in Bundesbank gold holdings between 2011 and 2012 was due to the Bundesbank supplying gold for use in the German Ministry of Finance’s gold coin program (see below).
Second Gold Repatriation Program
In January 2013, the Bundesbank announced a ‘new’ gold repatriation plan (Plan B), different to the plan it had announced in October 2012 that had called for the transfer of 150 tonnes of gold from the FRB over 2013 – 2015.
The ‘new’ plan[10] intended to transfer gold from New York and Paris so that by 2020, the Bundesbank would be storing 50% of its gold holdings in Frankfurt, 37% in New York, an unchanged 13% in London, and 0% (zero) in Paris. In tonnage terms, the plan required the transfer of 300 tonnes of gold from New York to Frankfurt and the transfer of 374 tonnes of gold from Paris to Frankfurt by 2020.
In January 2014, the Bundesbank reported on the first full year of its gold repatriation project. Surprisingly, during the entire calendar year of 2013, the Bundesbank only succeeded in transporting back a paltry 5 tonnes of gold from New York, and 37 tonnes of gold from Paris[11]. The 5 tonnes of gold transported from New York was not even Good Delivery gold, and had to be melted down and recast into new bars, suggesting that the New York Fed had given the Bundesbank low-grade coin bar gold of dubious purity.
The inability of the Bundesbank to repatriate 50 tonnes of gold from New York during calendar year 2013 retrospectively looks to have been the reason why it scrapped Plan A, and issued a new plan (Plan B) calling for 300 tonnes of gold to be transferred from New York by 2020[12].
In January 2015, the Bundesbank reported that it had managed to transfer 85 tonnes of gold from New York and 35 tonnes of gold from Paris, i.e. 120 tonnes overall[13][14]. Notably, of the 85 tonnes transferred from New York, the Bundesbank had to melt down and recast 50 tonnes of this gold, again suggesting that whatever gold the New York Fed had given the Bundesbank was not Good Delivery gold but merely low-grade coin bars or similar, or perhaps that the two central banks wanted to obscure the provenance of the metal.
In January 2016, the Bundesbank announced a progress update of its gold repatriation program during 2015. During calendar 2015, approximately 100 tonnes were repatriated from New York and 110 tonnes from Paris[15].
https://static.bullionstar.com/gold-...ld-300x158.png
Bundesbank gold storage distribution as of end of 2015. Click to enlarge.

As of the end of December 2015, the Bundesbank’s gold storage distribution was claimed to be as follows: 1,402 tonnes in Frankfurt (41.5 %), 1,347 tonnes in New York (39.9%), 435 tonnes in London (12.9%), and 196 tonnes in Paris (5.8%). In total, from 2013 until the end of 2015, the Bundesbank transferred 366.3 tonnes of gold from New York and Paris to Frankfurt, leaving 307.4 tonnes to transfer between 2016 and 2019.
Inability of the Bundesbank to produce a Gold Bar List
In all of its annual updates about its gold repatriation program, not once did the Bundesbank ever publish any details of the gold bars that it transferred nor anything resembling a gold bar weight list. In October 2015, the Bundesbank did publish a very incomplete list of its gold bar holdings, however this list omitted crucial industry standard details of the bar holdings, specifically the list omitted refiner brand, bar serial number, and year of manufacture of each bar. For London Good Delivery (LGD) gold bars, which the Bundesbank claims to hold, these attributes of refiner brand, serial number and year of manufacture are normal variables in industry standard gold bar weight lists[16]. Any attempts to enquire about these incomplete weight lists are met with deflection by the Bundesbank [17].
Secret Gold Repatriation from London to Frankfurt: 2000-2001
The Federal Court of Auditors’ confidential report on the Bundesbank’s gold which became public in October 2012 contained one previously strange and unknown claim, which was that between the years 2000 and 2001 the Bundesbank had completed the secret transportation by air of 940 tonnes of its gold from the Bank of England vaults in London to the Bundesbank headquarters in Frankfurt. Prior to this secret repatriation, the Bundesbank claimed to hold 1,440 tonnes of gold in London, therefore following the transfer, the German holdings at the Bank of England only totalled 500 tonnes[18]. As to why this secret repatriation of 940 tonnes of gold was undertaken and why the details had never been made public prior previously is unclear.
Valuation of Gold Reserves
The Bundesbank holds its gold reserves as an asset on its balance sheet and values these gold reserves at market prices on year-end balance sheet valuation date. As at 31 December 2015, the Bank claimed to hold 3,381,012 kilos (109 million ounces) of gold bar holdings. As of 31 December 2015[19], the Bundesbank’s gold reserves, which it lists as one line item of ‘gold and gold receivables’, were valued at €105.8 billion using a price of 1 kg = €31,289.91. Unlike most central banks, underneath this ‘gold and gold receivables’ line item, the Bundesbank quantifies the ‘gold receivables’ item, and for 2015 claimed that ‘gold receivables’ was just €272,585.72, and which represented “9 kg of gold receivables that were generated by the settlement of margins in the context of gold transactions.”
German Gold Coin Minting Program
The Bundesbank regularly sells small quantities of gold (amounting to a few tonnes) to the German Federal Ministry of Finance to supply gold for the finance ministry’s gold coin minting programme. Apart from these transactions, the Bundesbank stats that it doesn’t buy or sell any gold. Therefore, in its annual report, it is quite common to see the Bundesbank’s gold holdings drop my small amounts from year to year. For example, between December 2014 and December 2015, the Bundesbank’s gold holdings dropped by 3219 kilos, which was explained as “the sale of gold to the Federal Government at market prices for the purpose of minting gold coins”.
Audits of the German Gold
Recently, the Bundesbank has claimed that its gold reserves have been audited[20]:
“The gold reserves have been subject to several audits by Deutsche Bundesbank with fully satisfactory results. However, we cannot provide any details, since Deutsche Bundesbank and its partner central banks have agreed to maintain confidentiality with regard to the audits.”
Again, the disdain with which the Bundesbank treats enquires about its gold policies and activities highlights its total non-accountability to the public and its lack of transparency.
Gold Storage in Frankfurt
In October 2012, prior to the beginning of its gold repatriation program, the Bundesbank revealed that the gold that it already held in Frankfurt was stored as follows: 6,000 bars (75 tonnes) stored on industrial strength shelves, and a further 76,000 bars (945 tonnes) stored in sealed metal containers which are housed within 4 “safe boxes” (strong rooms)[21].
The quantity of 76,000 Bars (945 tonnes) held in sealed metal containers is very similar to the quantity of 940 tonnes that the Bundesbank claimed they brought back from London to Frankfurt in 2000-2001, so it appears that the gold that is in these sealed containers is the same gold that was previously held in London.
The metal containers and the rooms in which the containers are stored can be seen in 2 videos which are accessible on the Bundesbank website[22][23].
References and Links
1.^ “Statement by the Deutsche Bundesbank on the accounting treatment of the gold reserves”, Deutsche Bundesbank, 22 October 2012 https://www.bundesbank.de/Redaktion/...0_22_gold.html
2.^ “Bundesbank publishes gold bar list”, Deutsche Bundesbank, October 2015 https://www.bundesbank.de/Redaktion/...0_07_gold.html
3.^ “Germans Fret about Their Foreign Gold Reserves”, May 2012, Der Spiegel http://www.spiegel.de/international/...-a-833289.html
4.^ “Auditors report on negligent custody of German gold posted at GATA’s Internet site”, GATA, 22 October 2012 http://www.gata.org/node/11855
5.^ Direct download of German Federal Court of Auditors on Bundesbank gold http://www.gata.org/files/GermanGold...10-22-2012.pdf
6.^ “Statement by the Deutsche Bundesbank on the accounting treatment of the gold reserves” Bundesbank website, 22 October 2012 https://www.bundesbank.de/Redaktion/...0_22_gold.html
7.^ “Court Calls for Inventory of Gold Reserves”, Der Spiegel, 22 October 2012 (In German) http://www.spiegel.de/wirtschaft/soz...-a-862719.html
8.^ Deutsche Bundesbank’s gold holdings as per 31 December 2011, Distribution of holdings among storage locations https://www.bundesbank.de/Redaktion/...ublicationFile
9.^ “Stored securely throughout the world”, Bundesbank website, 28 November 2012 https://www.bundesbank.de/Redaktion/...the_world.html
10.^ “Deutsche Bundesbank’s new storage plan for Germany’s gold reserves”, 16 January 2013, https://www.bundesbank.de/Redaktion/...d_reserve.html
11.^ “Bundesbank successfully wraps up run-up phase of gold repatriation”, Bundesbank website 20 January 2014, https://www.bundesbank.de/Redaktion/...1_gold_en.html
12.^ “Bundesbank Changes Gold Repatriation Schedule”, BullionStar website https://www.bullionstar.com/blogs/ko...tion-schedule/
13.^ “Bundesbank successfully continues transfers of gold”, Bundesbank website, 19 January 2015 https://www.bundesbank.de/Redaktion/...s_of_gold.html

Today was a good day for learning, one can very easily makes mistakes when entering a position, especially with a new platform and big account.

I am going through the thread and have a few questions, so that I can understand better.

On post 1 you wrote the following:

The Money Flow Trading Method is based each trading day on Risk On or Risk Off which means are the markets heading down or heading up. I use the DOW to determine this each day. When the markets head down and we have Risk Off the money flows into US Dollars first and then the money is parked usually into US Bonds so the bonds go up and the yield goes down.

I use the DOW to determine this each day Do you look at a certain time frame when doing this at a certain time of day?
When you say, when the markets head down and we have risk off.
Do you mean when the DOW 30 heads down the money flows into US dollars first?
So if the DOW 30 is down, then usually any USD pairs, which is the base currency should then go up? For example USDJPY up and DOW down or GBPUSD down and DOW also down?
Or am I understanding this wrong?

What is the yield you are talking about? Bonds go up and the yield goes down?

On Post 7 you wrote the following:

So my Trade Plan will be to SHORT (Sell) 3 $100,000 US Dollar contracts of USD/JPY in 3 stages. My first trade will be my base trade and my MAXIMUM LOSS would be 100 PIPS or $1000 US Dollars

When you enter one of the 3 positions @ $100,000 US Dollar contracts, is this 10 standard lots? So will this be correctly entered if I would have place a USDJPY short position, see attach screenshot.

Would it also not be easier to understand if we post reports as screenshots or post the platform as a screenshot when a position was added?

Just a suggestion.

USD / JPY means: the power of USD currency against JPY currency.
If USD30 weakens, it means that USD will get weaker against JPY. So USD/JPY will also go down.
If it was for example: JPY/USD it would go up because JPY gets stronger against USD. (JPY/USD doesn't exist, just example for you to understand)

Hope I helped a bit until Benjamin answers to you.
Also I agree about using screenshots.

EDIT: Also the volume "100" you placed your open trade for is correct. 1 unit = 1,000 USD (any currency). 100 units = 100,000 USD (any currency)
We here trade 100 MICRO LOTS see:
http://www.babypips.com/school/presc...-and-loss.html

EDIT2: Considering we understood money flow for next period, out of USD and some into metals GOLD and silver we know the long trend.
When USD/JPY, DOW, GOLD and Silver don't follow the big trend resulted from understand moneyflow (USD/JPY and DOW going down, Silver and Gold going up) it means we have RISK ON because there is too much uncertain movement in the market (noise) until the bigger trend resumes.
Another variable of RISK ON or OFF are the news. They can both mean risk on or off depending on what the news are about. If for example: We hear that Italian Bank Monte Pasche is collapsing and we see EUR/X(any currency I don't know lets say EUR/JPY for the sake of it) is dropping hard, we can jump in the trend with risk off because "trend is your friend".

About time frames I guess H1 and Daily for a bigger image, you should always try to check the trend from the bigger timeframes down to the smaller ones.



THIS IS JUST MY UNDERSTANDING AND DON'T TAKE THEM AS ABSOLUTE ANSWERS UNTIL BENJAMIN ANSWERS YOU.
Perhaps I am wrong and it will be a very productive post you made for both of us.
Best regards

Thanks for your responds.

I understand the concept of the power of one currency against another, it just sounded wen B said "money flows into US Dollars"" that the USD then becomes stronger.


Thanks, will have a look at Babypips.

Also thank you for your view regarding the money flow it makes sense.

Hello KeepCalmfx

Your suggestion of screen shots is a great idea. I have many skills however doing screenshots is not one of them. I have done them in the past and it should be started immediately. You could teach me how to do it and any others that need to learn how to do it. My job will be much easier seeing everyone through the screenshots.

Now to the answers to your questions with much more detail and again excellent questions. The answers also help me focus on making the answers clear and to the point just in case TooSlow visits us. That is said with affection since we already know each other I think. Maybe from another life.

Here is your post copied and pasted and I will add my comments in after I have my Danish with some milk.

Today was a good day for learning, one can very easily makes mistakes when entering a position, especially with a new platform and big account.

I am going through the thread and have a few questions, so that I can understand better.

On post 1 you wrote the following:

The Money Flow Trading Method is based each trading day on Risk On or Risk Off which means are the markets heading down or heading up. I use the DOW to determine this each day. When the markets head down and we have Risk Off the money flows into US Dollars first and then the money is parked usually into US Bonds so the bonds go up and the yield goes down.

ANSWER Of Benjaminis: When we have Risk Off it means that most of the markets will GO DOWN and it could start in Asia and then continue in Europe and then to North America. More likely it will start in either Europe and continue into the North America open.

Now into much more detail about Money Flow. Since for the moment the US Dollar is still the MAIN Reserve currency of the financial world when Asian equities or Bonds or any Asset Class is sold the BIG PLAYERS park the money into the US Bonds (Treasuries) whether the 2 Year or the 5 Year or the 10 Year or finally the 30 Year. In order to BUY any of these US Bonds, they can only be purchased with US Dollars,
THEN and ONLY then can the US Bonds be purchased. As the US BONDS continue to be bought inversely the YIELDS go down.

Since the ELECTION not yet official until January 6, 2017 , MONEY in the TRILLIONS of Dollars have been sold and most of the MONEY has flowed into Equities. When we go back to RISK OFF the Flows will reverse. I just heard on CNBC the DEAN of the Markets , wise Art Cashin make an excellent point. that if the Dow 30 does not get OVER 20,000 in the last two trading days of the YEAR then the Dow will go down during 2017.

Here is why ? All the unrealized profits in the Dow 30 can be sold early next year so PROFITS do not need to be paid until 2018. EUREKA MOMENT !!! SMILE !!!

I use the DOW to determine this each day Do you look at a certain time frame when doing this at a certain time of day?
When you say, when the markets head down and we have risk off.
Do you mean when the DOW 30 heads down the money flows into US dollars first?
So if the DOW 30 is down, then usually any USD pairs, which is the base currency should then go up? For example USDJPY up and DOW down or GBPUSD down and DOW also down?
Or am I understanding this wrong?

ANSWER of Benjaminis: I think this was explained by my answer above. If not please ask me for more clarification please.

What is the yield you are talking about? Bonds go up and the yield goes down?

On Post 7 you wrote the following:

So my Trade Plan will be to SHORT (Sell) 3 $100,000 US Dollar contracts of USD/JPY in 3 stages. My first trade will be my base trade and my MAXIMUM LOSS would be 100 PIPS or $1000 US Dollars

When you enter one of the 3 positions @ $100,000 US Dollar contracts, is this 10 standard lots? So will this be correctly entered if I would have place a USDJPY short position, see attach screenshot.

Would it also not be easier to understand if we post reports as screenshots or post the platform as a screenshot when a position was added?

Just a suggestion.

ANSWER from Benjaminis:

Here is the reason behind the strategy explained properly for the first time here.

First we start with a longer term, Trade Plan of
3 months duration. If things change drastically the Trade Plan can be cancelled at anytime.

Now we have decided that WE have FOUR Trade Plans in effect until March 31, 2017 and of course as I said above we can change it if NEW FACTORS enter into the picture.

Here our the four Trade Plans in order of importance and likelihood.

(1) Short US30
(2) Short USD/JPY
(3) Long Silver
(4 Long Gold

THAT IS IT NOTHING ELSE FOR NOW. Perhaps if we SEE EUR/USD go below 100 then we might ADD , Short EURUSD then however the US Dollar Index will get stronger and that will complicate things until we see the new correlations.

Now to Strategy and Risk Management !!!

No Trade Plan should RISK a LOSS of more than 6%.

AT NO TIME can there be more than $10,000 US Dollars of the $50,000 US Dollars in the market. This formula is 20% of the trading capital. So when I trade One Million Dollars US REAL FUNDS , then I NEVER HAVE MORE THAN $200,000 US Dollars in the market and CAN NEVER HAVE A MARGIN CALL EVER as long as my Total Trade Plans do not use more than $10,000 US Dollars.

So now let us look at SCALING IN !!!

There is NO SET RULE that we NEED three positions on each Trade Plan. What I do is to make sure that the LOSS on any Trade Plan since we can be wrong once in awhile is 6%.

So say as we are doing and trading US30 and we enter the first position and it does not go UP for awhile against us of 50 PIPS and we have a DRAWDOWN of $500 US Dollars when we enter our second position usually if not always when it turns around the last position put on whether the second or third if need be is the MOST PROFITABLE one. This is where the CHARTS are very helpful as we can see Support and Resistance and also HERE the SAR and FRACTAL and Awesome Indicator helps very much.

At anytime we can close ALL our positions if we are in a Profit Position and decide that is the BEST thing to do. YOU CAN NEVER LOSE MONEY BY TAKING A PROFIT !!!

I sincerely hope that I have answered most if not all of anyone's questions and if not please ask me again until it is 100% clear for both of us.




Benjaminis

Hi Benjamin

Thank you for your post so far.

I am almost of to bed, but damn a Danish with some milk would have been very nice.

See the screenshots attach for directions to take a screenshot on windows and Mac.


On my laptop I use the "fn" botton next to the ctrl button together with the "prt sc" (home button) to take a screenshot.
As soon as you have the image on your clipboard, then go to the thread, while writing a comment, there is a "upload screenshot" below the "post new reply button"
Press that button - see screenshot below - in red it will say Press Control + V on your keyboard.
Then the screenshot will be loaded as an attachment, you can then click on it to see if it is correct.
then hit post new reply.

After posting, you can also check if it is correct and delete if not and repost.

Hope it makes sense/are clear. otherwise if someone else can explain easier, please do.

"As the US BONDS continue to be bought inversely the YIELDS go down"
For a non-native english speaker, YIELDS = you mean the accumulation of US Dollars prior to(and in order to) buying the Bonds right?

"Here is why ? All the unrealized profits in the Dow 30 can be sold early next year so PROFITS do not need to be paid until 2018. EUREKA MOMENT !!! SMILE !!!"
I'm sorry I don't understand this what you mean by unrealized profits in dow30? Im confused about DOW's unrealized profits May you further explain please

"MONEY in the TRILLIONS of Dollars have been sold and most of the MONEY has flowed into Equities. When we go back to RISK OFF the Flows will reverse"
Doesn't this mean the USD will gain strength against the other currencies? And as a result we should long USD/JPY instead? I'm confused. May you further explain please

Please clear my mind!
I will be off to bed now (11:30 PM here) and tomorrow most likely I won't be able to be active but I will catch up the day after!
All the best!

edit: these answers should be edited on your first post on this THREAD because they are very concise, well structured and covers almost everything you are telling us patiently for the past 27 pages of this thread. Perhaps this is what people like TooSlow want to read.

Small questions:
1. Awesome Indicator is Awesome Oscillator right?
2. Perhaps we all should use your technical method as well?I'm sure your reasons are solid for using this setup of SAR along with Fractals and AO.
3. Do you use smaller timeframes than H1? Do you intraday trade these 4 'Trade Plans'?
4. Do we trail stop on profit after the trade gets on profit?

Here are the answers and your confusion is good since now I have the chance to explain it to everyone interested.


"As the US BONDS continue to be bought inversely the YIELDS go down"
For a non-native english speaker, YIELDS = you mean the accumulation of US Dollars prior to(and in order to) buying the Bonds right?


ANSWER from Benjaminis: FIRST NO MATTER WHAT, you need US Dollars to BUY US Bonds so this has nothing to do with Yield.
Once you have your US Bonds then as The US Bonds go Up in value then the YIELDS go down such as around 1.35% on the 10 Year US Bonds (Treasuries) before November 8, 2016. The YIELDS are now OVER 2.50% so as you see it causes Interest Rates to go up whether the FED RAISES or NOT !!!
The 10 Year US Bonds set Interest Rates for Mortgages around the World.

"Here is why ? All the unrealized profits in the Dow 30 can be sold early next year so PROFITS do not need to be paid until 2018. EUREKA MOMENT !!! SMILE !!!"
I'm sorry I don't understand this what you mean by unrealized profits in dow30? Im confused about DOW's unrealized profits May you further explain please

ANSWER from Benjaminis:

Since the Dow has gone up when they are sold by Traders all around the World especially for the Wealth and Pension Funds in the USA the profits are taxed by the Government however those taxes only are payable by April 15, 2018 so WE KNOW FOR SURE the Dow 30 will SELL OFF !!! Our Trade Plan will work.

"MONEY in the TRILLIONS of Dollars have been sold and most of the MONEY has flowed into Equities. When we go back to RISK OFF the Flows will reverse"
Doesn't this mean the USD will gain strength against the other currencies? And as a result we should long USD/JPY instead? I'm confused. May you further explain please

ANSWER from Benjaminis: Yes the US Dollar will gain Strength and again cause BIG PROBLEMS for China and all the Emerging Nations. WE ARE IN A FULL BLOWN CURRENCY WAR !!! Gold Still should GO UP !!!

Please clear my mind!
I will be off to bed now (11:30 PM here) and tomorrow most likely I won't be able to be active but I will catch up the day after!
All the best!

To clarify about USD/JPY when the USD/JPY goes back towards 100 then it is getting stronger. When it goes towards 120 then it gets weaker. So, RISK OFF money is partly parked in the USD/JPY Pair as it Flows There.


Daily chart from Finviz

USD/JPY

http://finviz.com/forex_charts.ashx?p=d1&t=USDJPY

Please look at the CORRELATION !!!

Daily Chart on US30 from Finviz

http://finviz.com/futures_charts.ashx?p=d1&t=YM

Benjaminis

Thanks for clarifying everything Benjamin, you are a patient man.

I'm off to bed now but not before I invite F.G., GoForPip and everyone else reading to join the discussion.
What are your thoughts on the Trade Plan implemented? Do you like reading the snippets from Benjamin? TooSlow suggested to cut them down shorter, I belive your posts are very insightful whatever the length.

Regards

Ticket Account Symbol Usd Mr Amount S/B Open Close Stop Stop Move Limit P/L Gross P/L Open Comm Close Comm Roll Net P/L Time
115267331 02726762 US30 1,050.00 100 S 19,935.50 19,938.50 -3 -30.00 0.00 0.00 0.00 -30.00 12/27/2016 18:13
115165879 02726762 XAG/USD 900.00 5,000 B 15.860 15.942 16.165 8.2 410.00 0.00 0.00 -150.00 260.00 12/22/2016 23:39
115108306 02726762 XAG/USD 900.00 5,000 B 15.868 15.942 16.273 7.4 370.00 0.00 0.00 -200.00 170.00 12/22/2016 01:00
115012150 02726762 XAG/USD 900.00 5,000 B 16.116 15.942 16.621 -17.4 -870.00 0.00 0.00 -350.00 -1,220.00 12/20/2016 21:26
Total -4.80 -120.00 0.00 0.00 -700.00 -820.00

Those are my open positions as of now. This is my own FXCM UK Demo Account as I trade along with all of you. As soon as I study my teachers instructions on how to do a screenshot then it will be easier to understand.

I am going to take a rest for a few hours so please post on the thread anything that you want to talk about concerning joining the EXCLUSIVE 5% Forex Club.


Benjaminis

As The FED Goes !!!

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

Snippet:
Via MauldinEconomics.com,
The dots that the FOMC members contribute to the plot indicate their expectations for the federal funds rate.
Technically, its what they think rates should be, not a prediction of what rates will be on those dates. Is that a forecast? You can call it whatever you like. I think forecast is close enough.

But before we analyze the whatever-you-call-it, lets look back at the not-so-distant past.
A 5% risk-free return
Heres a rate history of the last 16 years:


inRead invented by Teads
http://www.zerohedge.com/sites/defau...7_recess_0.jpg
Ive highlighted this fact before, but its worth mentioning again: In 2007, less than a decade ago, the fed funds rate was over 5%. So were the interest rates for Treasury bills, CDs, and money market funds.

People were making 5% on their money, risk-free. It seems like ancient history now, but that year marked the end of a halcyon era of ample rates that most of us lived through.

The chart below shows historical certificate of deposit ratesbut remember, you could put your money in a money market fund and do better than the six-month certificate of deposit yield, back in 2007.

http://www.zerohedge.com/sites/defau...27_recess1.png
Todays young Wall Street hotshots have never seen anything like that. To them, the jump from 0.5% to 0.75% must seem like a big deal. Its really not. If the chart above were a heart monitor readout, we would say this patient is now dead and that last blip was an equipment glitch.
The point to all this is that these near-zero rates to which we have all adapted are by no means normal or necessary to sustain a vibrant economy.

W eve done fine with much higher rates before. They are even beneficial in some waysthey give savers a return on their cash, for instance. But there are likely to be consequences once we embark on this rate-increase cycle.

The FOMC cast members are all old enough to remember those bygone days of higher rates as well as I do. So, we would think they might at least foresee a return to normalcy at some point in the future.

Not so.
The FOMC members see nothing of the sort
Here is the official dot plot published by the FOMC. (I have included their preferred heading so that no one complains about my calling it a forecast, even though thats what it is.)

http://www.zerohedge.com/sites/defau...27_recess2.png
Each dot represents the assessment of an FOMC member. That group includes all the Fed governors and the district bank presidents. All 17 of them submit dots, including the presidents of districts who arent in the voting rotation right now. There would be 19 dots if the two vacant governor seats had been filled.
That flat set of dots under 2016 represents a rare instance of Federal Reserve unanimity: They all agree where rates are right now. (See, consensus really is possible.) The disagreement sets in next year. For 2017, theres one lone dot above the 2.0% line, but the majority (12 of 17) are below 1.5%.

Nevertheless, it will be a much different year than this one if they follow through. The dots imply that the fed funds rate will rise a total of 75 basis points next year.

Presumably, that would be three 25 bps moves, but they can split it however they want. They could ignore their expectations completely, too. This time last year, the FOMC said to expect a 100 bps rise, or four rate hikes, in 2016. We got only one.

Follow the dots on out and you see that their assessments trend a little higher in the following two years, and then we have the longer run beyond 2019. Most FOMC participants think rates at 3% or less will be appropriate as we enter the 2020s.

The most hawkish dot is at 3.75%.
Think about what this means


Todays FOMC can imagine raising rates only to the point they fell to about halfway through their 20072008 easing cycle. They see no chance that overnight rates will reach 5% again. None.

Here is another view of the same data, that shows how the dots shifted.

http://www.zerohedge.com/sites/defau...27_recess3.png
Looking at each set of red (September) and blue (December) dots, we see only a slightly more hawkish tilt than we saw three months ago. The Longer Term sets are almost identical two of the doves moved up from the 2.5% level, while the two most hawkish hung tight at 3.75% and 3.50%.

That word hawkish is relative here. By 2007 standards, these two voters are doves. But, Toto, I've a feeling we arent in 2007 anymore.
* * *
Contrary to common belief, its not greedy Wall Street brokers that are wrecking the US economybut academic policymakers like the ones employed by the Federal Reserve. And they all have the best intentions Read financial-bestseller author John Mauldins riveting special report, How the High Priests of Economics Are Leading Us to Monetary Hell. Click here to get your free copy now.

GREAT CHART on USD/JPY

http://www.forexfactory.com/attachme...9&d=1482367224

http://www.forexfactory.com/attachme...3&d=1482890139

EN perhaps we will have sell opportunity later on. Pending order.
UJ potential sell opportunity

https://www.bloomberg.com/news/artic...ity-fears-loom

Snippet:

China bulls could be facing a grim New Year’s eve.
The first day of 2017 is when an annual $50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away.

China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped.
https://assets.bwbx.io/images/users/...A/v2/-1x-1.png
“You have Chinese New Year quite early, and because of that one-month window, most of the banks will try to lock the money in a three-month cycle,” said Arthur Lau, Hong Kong-based head of Asia ex-Japan fixed income at PineBridge Investments. “The current situation in the bond market is partly because of year-end and because of Chinese New Year.”

The week-long Lunar New Year holidays are traditionally a time when people give out cash gifts and companies pay employee bonuses.
China’s 10-year government bond yield has surged 21 basis points in December, poised for its biggest monthly increase since August 2013, and its first annual gain since that same year. The yuan’s 6.6 percent decline in 2016 puts it on course for its worst year since 1994, while the Shanghai Composite Index is headed for its largest drop in five years.





Bond and money markets may stabilize after Lunar New Year holidays -- which start Jan. 27 and end Feb. 2 -- though they’re unlikely to return to levels before the latest rout owing to yuan weakness and tighter monetary policy, said Lau. The People Bank of China’s yuan position -- a gauge of capital flows -- dropped the most in 10 months in November amid expectations for faster U.S. rate increases.


The onshore yuan’s surging trading volume suggests outflowsare quickening, according to Harrison Hu, chief greater China economist at Royal Bank of Scotland Group Plc. The daily average value of transactions in Shanghai climbed to $34 billion in December as of Monday, the highest since at least April 2014, according to data from China Foreign Exchange Trade System.

“In the new year, the new foreign-exchange purchase quota starts, so we expect yuan positions in January to drop significantly," Liu Dongliang, an analyst at China Merchants Bank Co., wrote in a note this month. "Within the foreseeable future, the market will be pessimistic about funding conditions. It happens to be near year-end now, where money markets are tight, and after New Year’s Day it’s almost Chinese New Year.”


Comments from Benjaminis: These are important facts to file away in your memory bank.

http://www.321gold.com/editorials/th..._s_122716.html

Snippet:
Dec 27, 2016

1. Gold may be in the first stage of a significant rally. Please click here now. Double-click to enlarge.
2. Gold has burst out of the short term down channel, and the recent action of the “smart money” commercial traders is very positive.
3. Please click here now. This COT report for gold shows the commercial traders not only covering short positions in the latest reporting period, but also adding a nice number of longs!
4. This is very encouraging news. Regardless, amateur gold enthusiasts need to buy dips and sell rallies, to mimic the smart money professional traders.
5. On that note, please click here now. Double-click to enlarge.
6. Gold has already rallied about $25 from the $1125 area lows, and the commercial traders are almost certainly booking partial profits now. As the saying goes, the early bird gets the golden worm!
7. I have been getting emails from some gold community investors who are worried that the Indian government is conducting a “war on gold”. To a degree, that’s true, but all governments tend to prefer debt and fiat to gold.
8. Gold empowers citizens and debt and fiat money allow governments to present themselves as grandiose “people helpers”.
9. Narendra Modi is India’s prime minister. In my professional opinion, he’s obsessed with turning India into what is really best described as a giant GDP growth factory.
10. Individual freedom in India doesn’t seem very important to Modi. His focus is on achieving double digit GDP growth, and creating an enormous middle class.
11. Modi clearly embraces the “end justifies the means mantra”, but I don’t think it’s negative for gold demand, except perhaps in the very short term.
12. In the big picture, Modi’s actions are very supportive for higher gold demand. Simply put, as citizens get higher incomes, they buy more gold. Some is bought in the open market, and some is bought in the black market.
13. The short term picture for India-focused gold investors is starting to look better as well. Please click here now. While nobody should celebrate before there is an actual duty cut, where there is smoke, there is fire.
14. Modi looks like a hypocrite if he talks about reducing black money while keeping high gold import duty policies that promote smuggling. The upcoming February budget could see India’s finance ministry finally unveil a cut of the duty.
15. Meantime, from a geopolitical perspective, tensions may be set to increase between Japan and China, with US debt being the catalyst.
16. Some analysts note that Japan has now surpassed China, and is the largest holder of US T-bonds.
17. The term “surpassed” is a bit misleading. To understand why that’s true, please click here now. Japan actually sold Treasuries recently, although China sold more.
18. China and Japan have a longstanding dispute over a military issue that has never been resolved. I’m not concerned about Donald Trump causing a deterioration in US-China relations, but I’m very concerned that he could ignite a significant rise in China-Japan tensions. That’s good news for gold.
19. A crash in the US stock market is possible early in 2017, and it could happen soon after Trump is inaugurated as president. That crash would create an institutional surge out of the US dollar, and into the yen and gold.
20. That crash could cause Japan and China to sell even more Treasuries, as their stock markets would follow the US market.
21. The current time frame may turn out to be the calm before a major 2017 global markets storm!
22. Please click here now. With inflation starting to perk up while mine reserves dwindle, gold stocks are poised to become a highly sought after asset for the rest of this decade.
23. On that note, please click here now. Double-click to enlarge. From both a fundamental and technical perspective, GDX looks superb. There’s a bull wedge in play, and the price is gapping higher in early morning trading.
24. GDX looks set to make a beeline straight for $22. The bottom line is that there’s really no better way for a global community investor to start their day, than by watching gold stocks move higher!

Thanks!

Cheers
Dec 27, 2016
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com

HEADS UP - IMPORTANT NEWS !!!

https://www.theguardian.com/business...l-8bn-ecb-says

Snippet:

Monte dei Paschi shortfall €8bn, ECB says
Italian bank’s bailout cost rises as European Central Bank puts recapitalization requirement higher than previously estimated
https://i.guim.co.uk/img/media/9a6f6...sm=12&fit=max&

Italian government is expected to give €6.5bn to Monte dei Paschi bank taking its stake to 70%. Photograph: Max Rossi/Reuters
Rob Davies
Tuesday 27 December 2016 11.44 GMT Last modified on Tuesday 27 December 2016 22.00 GMT



The cost of rescuing Monte dei Paschi has escalated after the European Central Bank told the struggling Italian lender that it required €8.8bn (£7.5bn) to mend its finances.


The lender, Italy’s third-largest bank, has tried in vain to arrange a €5bn rescue package with private investors but the ECB said the sum would not have been enough.

Monte dei Paschi, whose history can be traced back to 1472, said it had asked the ECB to approve a “precautionary recapitalisation”, a type of state intervention that allows the institution receiving it to stay solvent.

The government is now expected to inject €6.5bn into the bank, according to reports, taking its stake in to about 70%. The remainder will come from institutional investors seeing their bonds converted into shares, ridding the bank of about €2bn in debt.

In a statement, Monte dei Paschi said the ECB had written to the Italian finance ministry warning that the bank’s liquidity position – its ability to turn assets into hard cash – had suffered a “rapid deterioration”.

This was partly down to a large number of loans made to people who cannot pay them back, among the factors that saw Monte dei Paschi come last out of 51 banks in stress tests to check lenders’ resilience to economic shocks.

“The bank has quickly started talks with the competent authorities to understand the methodologies underlying the ECB’s calculations and introduce the measures for a precautionary recapitalisation,” it said in a statement.

Monte dei Paschi said the ECB had told it that the €8.8bn bailout figure was determined by the results of stress tests that the bank failed this summer. It also noted that the bank’s liquidity position had worsened between the end of November and 21 December.

The European commission said on Friday it would work with Rome to establish conditions for a bailout of Monte dei Paschi, likely to involve tapping a €20bn rescue pot approved by the Italian government last week.

But the proposals have not met with support from more hawkish official in the ECB. Jens Weidmann, the president of Germany’s Bundesbank and a member of the ECB’s governing council, said the Italian government ought to consider whether it should rescue the bank if it was in a bad financial state.

“For the measures planned by the Italian government the bank has to be financially healthy at its core,” he said in an article published in the German newspaper Bild. “The money cannot be used to cover losses that are already expected. All this must be carefully examined.”

Monte dei Paschi has struggled to recover from the 2008 banking crisis, when it paid Santander €9bn (£7.6bn) for Banca Antonveneta. The deal doubled the size of the lender, transforming it into Italy’s third largest behind UniCredit and Intesa Sanpaolo.

Three years ago, Monte dei Paschi’s problems worsened and it was forced to ask the government for €4bn amid a scandal over loss-making derivatives contracts and alleged fraud. It will now go back to the government for funds after talks with private investors failed, with Qatar’s sovereign wealth fund thought to have skippered the plan by refusing to take part. The Italian government already has a 4% stake in Monte dei Paschi.

http://wolfstreet.com/2016/12/27/cos...anking-crisis/

Snippet:
Monte dei Paschi di Siena sinks deeper into the mire.


Over the Christmas holidays, when no one was supposed to pay attention, and when the markets were closed, the bailout costs of Monte dei Paschi di Siena, the third largest bank in Italy, and the center of the Italian banking crisis, suddenly jumped by 75% to €8.8 billion ($9.2 billion)!


Just how immense the black hole inside of a bank really is remains unknown until the bank collapses entirely and the pieces are sorted out. No one wants to know, especially not bank regulators. But when banks are teetering, and a bank bailout, or rather a bondholder bailout is being discussed, the aspects of that hole begin to emerge, and the hole keeps getting bigger the longer someone looks at it.


Earlier this year, the ECB’s stress tests of 51 large European banks determined that Monte dei Paschi was the shakiest among them. The ECB gave the bank until the end of 2016 to raise enough capital or contemplate the prospect of being wound down.

Last week, after Monte dei Paschi failed to work out a private-sector rescue deal led by JP Morgan, a taxpayer bailout was moved to the front burner. The bank’s shares and bonds were suspended from trading until the details of the bailout would emerge. This came after two prior capital increases from the private sector in recent years had failed to fill the holes. Each time, gullible investors had gotten crushed.

On Friday, the Italian government decided to shanghai its taxpayers into bailing out the bank’s bondholders with only a small haircut for holders of certain junior bonds. The decree it approved to that effect was based on the assumption that a €5-billion bailout – a “precautionary recapitalization” – would be needed.

A “precautionary recapitalization” is EU lingo for a taxpayer bailout of a bank that is “illiquid” but is still deemed “solvent.” If a bank is no longer “solvent,” it needs to be wound down, under the new EU regulations banning state aid. This would entail much bigger losses for bondholders and possibly some losses for uninsured depositors.

However, a “precautionary recapitalization” would only require that certain junior bondholders take a small first loss before a big capital contribution by the state would bail out the rest, on terms that need to be endorsed by EU state-aid officials in Brussels.
But the tab keeps ballooning.

GOLD VERY IMPORTANT NEW STRUCTURES FOR 2017

http://www.zerohedge.com/news/2016-1...ationalization

Snippet:
China’s Gold Market Opens Up To Boost RMB Internationalization
http://www.zerohedge.com/sites/defau...ure-227218.png
by BullionStar
Dec 27, 2016 7:24 AM

Last week the Shanghai Gold Exchange (SGE) launched a new English website to offer international customers more information and tools on trading gold in renminbi through its subsidiary in the Shanghai Free Trade Zone the Shanghai International Gold Exchange (SGEI). BullionStar took the opportunity to translate a speech by a Teng Wei, Deputy General Manager of the SGEI, named “How China’s Gold Market Can Help The RMB Achieve International Status” that was held at the Renminbi World summit in Beijing on the 29th and 30th of November 2016. In the speech Teng Wei outlined his vision for the SGEI going forward regarding renmibi (RMB) internationalization, connecting the onshore and offshore renminbi market and increasing gold market share.


My comment before you read the translation:

1) In the financial blogosphere the general perception is that the SGEI has been a failure since it was launched in September 2014. This analysis is based on the assumption that the trading volume of the most popular SGEI contract (1 Kg 9999 - iAu99.99) has been tepid for two years now. But this analysis neglects two important elements. First, iA99.99 can be traded competitively “on Exchange”, but also in the OTC market. The OTC possibility is hardly known by commentators in the English world, though the related volumes are significant. Have a look at the next chart in which I’ve plotted iAu99.99’s weekly trading volume “on Exchange” and in the OTC market. Clearly iAu99.999 is traded mainly in the OTC market.
https://www.bullionstar.com/blogs/ko...y--651x380.png
Second, international customers of the SGEI can not only trade the SGEI gold contracts, but they can also trade SGE (domestic) gold contracts. Logically, as at present liquidity on the SGE is much higher than on the SGEI, many international customer that seek to trade gold in renminbi, and don’t need to export the metal, will choose to trade SGE gold contracts. When observing total trading of all SGE(I) gold contracts, there is a clear rise in volume since the SGEI was launched.
https://www.bullionstar.com/blogs/ko...GE-651x342.png
Up till now international customers are mainly trading SGE contracts. The significant rise in trading volume of all SGE(I) contracts since September 2014 is due to the inception of the International Board (SGEI). In the second week of November 806 tonnes was traded on the SGE(I), the highest amount ever. So the launch of the SGEI has not been a failure in my opinion – it has elevated gold trading in (offshore) renminbi.
For more information please read my post The Workings Of The Shanghai International Gold Exchange or have a look at the graph below.
https://www.bullionstar.com/blogs/ko...ow-651x719.png
International customers can trade domestic contracts but are not allowed to withdraw the metal from the vaults (and export).
2) Teng Wei mentions that in 2015 gold demand in China and India was 985 and 849 tonnes respectively. In the case of China this refers only to consumer demand, not institutional demand. Chinese consumer and institutional demand in 2015 combined was well north of 2,000 tonnes.
For more information please read my post Spectacular Chinese Gold Demand 2015 Fully Denied By GFMS And Mainstream Media.
3) A gold exchange doesn't flourish overnight. The SGE was launched in 2002; in that year its total trading volume was 22 tonnes and withdrawals accounted for 16 tonnes. Ten years later total trading volume was 3,175 tonnes and withdrawals accounted for 1,138 tonnes. In 2015 total trading volume was 17,033 tonnes and withdrawals accounted for 2,582 tonnes. The development of the SGE, becoming the largest physical gold exchange globally, took time and it can be no different for the SGEI.
Document Translation [brackets added]:
Teng Wei: China’s Gold Market Opens Up To Boost RMB Internationalization
29-11-2016 Sina Finance
The 2016 RMB summit was held in Beijing on the 29th and 30th of November. Deputy General Manager of the Shanghai International Gold Exchange Center Teng Wei participated in the forum and discussion on “How China’s Gold Market Can Help the RMB Achieve International Status”. He expressed that using Shanghai’s free trade zone status, investors can open trading accounts denominated in RMB and participate in trading directly through the Exchange’s international board [SGEI] that allows access to most of the precious metal products that are traded in China. The international board has developed relatively well since establishment with active participation from international members and steadily increasing trading volume.


Gold on the international board is quoted and settled in RMB, which effectively connects the RMB onshore market and offshore market. This will extend the scope of RMB usage across borders and provide a new channel for inward capital flows. It is a move that is beneficial to expand the RMB usage to steadily promote internationalization of the RMB.


The actual speech:
Ladies and gentlemen, good afternoon, I am Teng Wei from the Shanghai International Gold Exchange. I am delighted to participate in this forum organized by the Asian Bankers Association to have a chance to speak and interact with everyone about opening China’s gold market to the world and how that can help the internationalization of the RMB.

This afternoon, I would like to touch upon on three topics. The first topic is the new pattern of the internationalization of the RMB and the global gold market. China’s gold market was established in 2002 with the launch of the Shanghai Gold Exchange. If anyone is familiar with the history of China’s gold market, you will know that before the year 2002 the Chinese gold market was entirely ran by the People’s Bank of China, including the process of purchasing, allocating and storing of gold. There wasn’t a single unified market where all participants could trade at the same time. Since the year 2002, with approval of the State Council, the People’s Bank Of China developed gold spot trading on the Shanghai Gold Exchange, as well as gold futures trading and over-the-counter trading via commercial banks, etc, which formed the basis for a multi-level diversified gold market system.

While the Chinese gold market was developing rapidly, the pattern of the global gold market was also having a dramatic change. As time passed, the international gold spot market was heavily concentrated in London and the international gold futures market has been concentrated in New York. However, in recent years, with the rise of gold demand in China, India and other Eastern nations, and with the exit of European and American banks from the precious metals market, it’s clear that Western gold is moving to the East. In 2015 gold demand in China and India was at 985 tons and 849 tons respectively. These figures alone account for 45% of global [consumer] gold demand. With gold demand from other markets dipping to various levels, China is not only the world’s largest gold producer and importer of gold, but has also become the world’s largest gold consumer.


Just now, I mentioned that the two main centers for gold trading are London and New York, and the current situation is Western gold flowing to the East. Everyone, have a look at some statistics that I have here, showing that just China and India alone make up over 45% of global gold demand. This was last year’s data.

Since the year 2005, when the RMB exchange rate was reformed, international investors’ willingness to trade in RMB denominated assets has also increased. This has objectively enhanced the Chinese gold market’s international status and garnered attention. In recent years, the RMB exchange rate is expected to have some changes.

The Shanghai Gold Exchange provides the important infrastructure for China’s gold market. ECB officials have mentioned that an important part of promoting the internationalization of the RMB is having a good financial market infrastructure. The exchange is also an important “all-in-one” foundation for gold transactions, clearing, delivery and storage. It serves with the commitment to provide gold investors with efficient and convenient market services. It has been 14 years since establishment of the exchange in the year 2002 and development has been rapid with annual trading volumes increasing 40% on average.


At the end of 2015 there were over 8.6 million individual accounts, over 10,000 institutional accounts and the total gold trading volume for the year reached 17,000 tonnes. The exchange was ranked as one of the largest and we firmly grasped an important opportunity for the internationalization of the RMB with the profound changes happening in the gold market. At the same time, we want to build a harmonious ecological gold market that sets a new path for the global gold market and achieve the status of being a global gold power from a large gold holding nation.

For the second point, I would like to explain how opening up China’s gold market externally to the world can help the internationalization of the RMB. To further promote and innovate China’s gold market, on 18th September 2014, the Shanghai Gold Exchange set up an international board [SGEI], open directly to foreign investors. This move has effectively connected China’s domestic gold market and the international gold market. Using Shanghai’s free trade zone, investors can open trading accounts denominated in RMB and participate in trading directly through the exchange’s international board that allows access to most of the precious metal products that are traded in China. The international board has developed relatively well since establishment with active participation from international members and steadily increasing trading volume.


As of now, the exchange has 67 international members, including most of the world-renowned gold suppliers and traders like Mr Thomas McMahon, who is also our Exchange’s member. At the end of the third quarter of 2016, the international board had recorded a total of 7,837 tonnes of gold traded, with a turnover valued at nearly 200 billion RMB. The Shanghai International Gold Exchange is the test pilot and pioneer for opening up China’s gold market to the world. It is significantly important for further increasing the capacity, expansion and international influence of China’s gold market. In addition, the international board uses RMB for settlements, producing an effective convergence of the RMB offshore and onshore markets, expanding the cross-border use of the RMB and providing a new channel for return of funds. All these points steadily promote the internationalization of the RMB and serve as a useful exploration.


For RMB denominated gold products to gain popularity outside of China, we think the prerequisite is to provide a fair offering for global gold market transactions, with reliable gold benchmark pricing in RMB, using the Shanghai Gold Exchange benchmark pricing mechanism [Shanghai Fix] for our trading platforms. The weight of the gold traded is 1 kilogram, with a fineness of no less than 99.99%. Using a price inquiry method and market volume, a balance is reached to form the benchmark price of gold measured in RMB. The price announcements will be released externally each trading day at 10:15 and 14:15.


At present, the Shanghai gold benchmark price is being used by domestic gold producers and suppliers for hedging and settlements. More and more commercial banks are also using the Shanghai gold benchmark price for gold leasing and financing as the standard. More and more products linked to the Shanghai gold benchmark will be made available.

Other than domestic usage, the Shanghai gold benchmark price is also being actively studied more and more by external markets regarding its application. In October, the exchange signed an agreement with Dubai for the right to use the Shanghai gold benchmark price and authorization was given for the Dubai gold exchange to use the Shanghai gold benchmark price as the standard for offshore RMB denominated futures. The signing of this agreement marks the use of the Shanghai gold benchmark price in international financial markets for the first time. This greatly helps to elevate the international influence of the exchange in global markets and improves the image and reputation of the RMB abroad.


For the third point, I would like to share with everyone how the Shanghai Gold Exchange acts as an important infrastructure for internationalization in three steps. As the forerunner for opening domestic markets and innovation, the Shanghai Gold Exchange cannot forget its historical mission. We are determined to take the international and market-oriented strategy.


Overall, for the internationalization process, we have three steps to take. The first step is to be open and inclusive, actively inviting foreign investors to come in. Just now, we have introduced our international board after the establishment of the Exchange and we will continue to increase publicity efforts. In accordance to high standards and multifaceted principles, we will continue to increase and expand international membership of the Exchange. Accordingly, we have carried out a variety of promotional activities in major financial hubs and countries and regions along the new Silk Road to allow more international market participants to hear the sound coming from the Chinese gold market. The exchange also takes the opportunity to actively learn from the experience of advanced international markets in the optimization of various trading systems and innovation of all kinds of trading products.

For the second step, since we have invited guests inwards, we also have to step outwards. Through cooperation and win-win situations, the gold Exchange
can be promoted and step out of China. The Shanghai gold benchmark price has now taken a first step with the Dubai Gold Exchange agreement. This can be considered an ice-breaking move and serve as a cooperation model for other overseas markets and improve the recognition, branding and acceptance of the Shanghai gold benchmark price. Taking this as an opportunity, the Shanghai Exchange, together with the Chicago Mercantile Exchange (CME, COMEX), the Hong Kong Stock Exchange, the Malaysian Stock Exchange and a number of foreign exchange markets explored on long-term cooperation mechanisms that will allow foreign investors to directly participate in our gold market, in RMB denominated gold trading, standard gold settlement, and many other aspects and modes of cooperation that will increase the Shanghai Gold Exchange’s international market influence.


The third step is to realize RMB internationalization and increase global transaction on the exchange through integration and upgrades. As the international financial markets continue to merge and develop, market boundaries are increasingly blurred and we believe that market fragmentation will be removed gradually. In recent years, we can all notice that there are more and more mergers and acquisitions among major exchanges in the world. We hope to learn from the experiences of such joint stock mergers and acquisitions between global exchanges and explore the different modes of industry integration with overseas exchanges. By offering a wide range of local and overseas products through an open platform [SGEI], we hope to create a world class exchange group. The journey of the internationalization of the Shanghai Gold Exchange will epitomize the opening of China’s financial markets to the outside world and play an important part in the internationalization of the RMB. With Shanghai becoming the third most important market in the world after London and New York, the Chinese gold market will make a great contribution to the internationalization of the RMB. Thank you everyone.

The Wrap Up - Nightly

For all my fellow Forex traders from Europe and other parts of the world when you wake up please read the last few pages. I have left important information there for you. This has been a very productive day for me and I thank everyone for their cooperation and participation.

Take care and trade carefully in these type of markets !!!


Benjaminis