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8/7/2019 FINALE GOLD[1]

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VOLATILITY IN GOLDPRICES



MEMBERS

� KARAN SHETH

� MITHIL SHAH

� JAY SHETH

� JIGAR GOSALIA� ASHWINI SHETTY

� KINJAL SHAH

� RUCHIR SHAH

� NEESHA CHAUHAN

� DHAVAL SHIRODARIYA



CAPITAL MARKET

EQUITY COMMODITY



COMMODITY MARKET

� Meaning

�

Important Ingredients� Advantages



COMMODITIES TRADED IN

THIS MARKET� Precious Metals: Gold, Silver, Platinum etc

� Other Metals: Nickel, Aluminum, Copper etc

� Agro-Based Commodities: Wheat, Corn,Cotton, Oils, Oilseeds, etc.

� Soft Commodities: Coffee, Cocoa, Sugar etc

�Energy: Crude Oil, Natural Gas, Gasoline etc



WHY GOLD?

Origin

Valueable

Bedrock

Easily liquid

Olive branch-symbol of peace



Where does all the gold go?



Which countries produce the worlds

gold?



HISTORY OF GOLD

� Discovery of Gold

� India, the largest gold market prior to 1962

� Historically gold is used as a medium of

exchange

� Value for Indian people



COMMODITY EXCHANGES IN INDIA

28 RECOGNIZED FUTURE EXCHANGES28 RECOGNIZED FUTURE EXCHANGES

MAJOR EXCHANGES ARE: MAJOR EXCHANGES ARE:

NCDEX

MCX

NMCE



NATIONAL MULTI COMMODITY

EXCHANGE OF INDIA LIMITED (NMCE)

FIRST DE- MUTUALISED ELECTRONIC MULTI

COMMODITY EXCHANGE IN INDIA

ISO 9001:2000 CERTIFICATION

PROMOTED BY PNB,CWC.

STARTED IN 2001



NATIONAL COMMODITY AND

DERIVATIVES EXCHANGE LIMITED(NCDEX)

STARTED IN APRIL 2003.

THE NCDEX COVERED BY DIFFERENT ACTS

PROMOTED BY ICICI BANK,LIC.

ONLINE COMMODITY EXCHANGE



MULTI COMMODITY EXCHANGE OF

INDIA LIMITED (MCX)

STARTED IN NOVEMBER 2003.

FOURTH LARGEST ENERGY EXCHANGE

THIRD LARGEST BULLION EXCHANGE

INDEPENDENT &DE- MUUALISED EXCHANGE WITH A

PERMENENT GOVT.RECOGNITION



COMMODITIES TRADED

Commodities NCDEX MCX NMCE

BullionGold, Silver, Brent Gold, Silver, Silver Coins Gold, Silver

Minerals

Electrolytic Copper Cathode,

Aluminum Ingot, Nickel,

Cathode, Zinc Metal Ingot,

Mild Steel Ingots

Aluminum, Copper, Nickel,

Iron/Steel, Tin, Zinc, Lead

Aluminum, Copper, Lead,

Nickel, Zinc

Oils And Oil

Seeds

Cotton Seed, Oil Cake, Crude

Palm Oil, Groundnut (In

Shell), Groundnut Expeller

Oil, Cotton, Menthe Oil, RBD

Pamolein, RM Seed Oil Cake,Refined Soya Oil, Rape Seeds,

Mustard Seeds,

Caster Seed, Yellow Soybean,

Soy Meal

Castor Oil/Castor Seeds,

Crude Palm Oil/ RBD

Pamolein, Groundnut Oil,

Mustard seed Oil, Soy

Seeds/Soy Meal/ Refined Soy

Oil, Coconut Oil Cake, Copra,

Sunflower Oil, Sunflower Oil

Cake, Tamarind Seed Oil,

Menthe Oil

Castor Seed, Copra, Soybean

Oil, Mustard Seed

Pulses

Urad, Yellow Peas, Chana, Tur,

Masoor

Chana, Masur, Tur, Urad,

Yellow Peas

Chana



Bretton Woods System, 1944-1971

Delegates attend the

Bretton Woods conference

in July of 1944 at the Mt.

Washington Hotel in

Bretton Woods, New

Hampshire, United States

The Bretton Woods system of

monetary management

established the rules for

commercial and financial relationsamong the world's major industrial

states in the mid 20th century.

The Bretton Woods system was thefirst example of a fully negotiated

monetary order intended to govern

monetary relations among

independent nation-states.



BWS Lead to establishment of :

� IMF -International Monetary Fund

� IBRD -International Bank For Reconstruction

And Development.{World Bank}



� USD Status Of Universal Reserve Asset

� Value Of USD - 1 Oz Gold = USD($) 35

� Currency Valuation Against USD.

� Concept Of Pegging & Par Value Mechanism

� Dual Exchange Rate System Abolished And USDWas Universally Accepted.

FEATURES



� Fixed Value Of Gold

� No Obligation To Surplus Countries To Revalue Their

Currencies

� Repeated Revaluation That Lead To Dilution Of TheSystem

� Triffins Paradox: Is the observation that when anational currency also serves as an international

reserve currency (as the US dollar does today)

REASONS FOR FAILURE OF

BWS



GOLD STRUCTURE



� Demand for Gold is widely spread around the world.

�East Asia, The Indian Sub-Continent and The Middle East

accounted 70% of world demand in 2008.�55% of demand is attributable to just five countries

India, Italy, Turkey, USA and China.



WHAT MAKES GOLD SPECIAL?

� Timeless and very timely investment

� Effective diversifier

� Ideal gift

� Highly liquid

� Gold responds when you need it most

� Currency without a country



Five major reasons why you might want to invest

in gold

� It provides a bit of safety

� To diversify

�To protect against inflation

� To hedge against the dollar

� To manage risk



Reasons to own Gold

� A History of Holding Its Value

� Deflation

�Geopolitical Uncertainty

� Portfolio Diversification



What are the risks of investing in Gold?

� Theft or loss

� Fees

�Higher taxes

� Loss of value



FACTORS AFFECTING

PRICES OF GOLD



CENTRAL BANK

Central banks are heavy buyers and sellers

RBI buy gold when reserves are too low as an ongoing

government policy

For eg. RBI bought 200 tones from IMF recently

India holds 6% reserves

China increased holdings

Printing of currency



PEER PRESSURE BUYING

TREND TO INVEST IN GOLD AFTER FINANCIAL

CRISIS OF 2008THE ADVENT OF GOLD ETFs, AN EASY WAY OF

SPECULATING ON GOLD



DEMAND AND SUPPLY

OVER PAST 3 YEARS SUPPLY HAS GROWN 59%

WHILE DEMAND HAS SURGED 62%

THIS IMBALANCE HAS CREATED A FUNDAMENTAL

SUPPORT IN THE DEVELOPMENT OF THE GOLD

MARKET AND AN ENVIRONMENT OF RISING

GOLD PRICES



INFLATION� To control inflation

� Stagflation in 1970 economic bubble

forming in precious metals

Year Inflation (%) Gold(% Change)

2005 4.20 21.22

2006 4.20 21.33

2007 5.30 14.56

2008 6.40 28.48

2009 8.30 21.81



INTEREST RATES

� Low returns on other instruments

� Stability of returns

�

Secured and maximum returns� Speculated returns on gold is 178%

whereas that of diamonds is 1.9%(for 5 years)

(Ref : ET 26/11/10)



WARS

� Destruction of assets

� Worthlessness of the currency

�

Demand for gold thus rises� Eg-:current war between south korea & north

korea, SENSEX went down by 600 points



METHODS TO INVEST IN GOLD

GOLD BARSGOLD BARS

GOLD COINSGOLD COINS

GOLD CERTIFICATESGOLD CERTIFICATES

GOLD INVESTMENT ACCOUNTSGOLD INVESTMENT ACCOUNTS

GOLD MINING STOCKSGOLD MINING STOCKS



LONDON GOLD PRICE FIXING

FIRST GOLD FIXINGFIRST GOLD FIXING 1212THTH SEPTEMBER, 1919.SEPTEMBER, 1919.

TWICE A DAY AT 10.30 AM AND 3.00 PM.TWICE A DAY AT 10.30 AM AND 3.00 PM.

CURRENT MEMBERS INVOLVED IN PRICE FIXING :CURRENT MEMBERS INVOLVED IN PRICE FIXING :

1.1. SCOTIASCOTIA--MOCATTAMOCATTA

2.2. BARCLAYS CAPITALBARCLAYS CAPITAL

3.3. DEUTSCHE BANKDEUTSCHE BANK

4.4. HSBCHSBC

5.5. SOCIETE GENERALESOCIETE GENERALE



FIXING PROCESS:-OPEN

AUCTION PROCESS

CHAIRMANANNOUNCES

OPENINGPRICE

NET-OFF OF

ALL ORDERS

CHAIRMANSUGGESTION

: TRYINGPRICE

ADJUSTMENTOF PRICE

QUOTINGOF PRICE



WEIGHT CONVERSION

TABLE

TO CONVERT

FROMTO MULTIPLY BY

TROY OU NCE GRAMS 31.1035

GRAMS TROY OU NCE 0.0321507

KILOGRAMS TROY OU NCE 32.1507

KILOGRAMS TOLAS 85.755



CONVERT USD/OUNCE PRICE

TO INR/10 G PRICE

STEPS EXAMPLE

ADD THE PREMIUM

1242 USD PER OUNCE WILL BE

(1243 X 46.2 X 10)/ 31.1

= 18465 INR/ 10 G.

MULTIPLY THE FIGURE BY INR RATE

OF USD

DIVIDE BY 31.1

MULTIPLY BY 10



The Dollar-Rupee-Gold RelationshipThe first scenario, we will assume that the price of Gold remains

constant, say $1000, and rupee appreciates (USD/INR rate falls). In this

case, the approximate indicative price of gold in INR for various

exchange rates, work out as per the following table.

USD/INR

Exchange Rate

Indicative price of

Gold in INR

Difference

50 16227

49 15907 -32048 15586 -321

47 15266 -320

46 14945 -321

45 14625 -320



Now, lets consider another scenario wherein the price of gold is

again constant, say $1000, but rupee depreciates (USD/INR rate

goes up). In such a scenario, the approximate indicative price of gold in INR works out as per the following table.

USD/INR Exchange Rate

Indicative priceof Gold in INR

Difference

50 16227 --

51 16548 321

52 16868 320

53 17189 321

54 17510 321

55 17830 320



� Both the above scenarios indicate that if the

international gold price remains constant.

� The gold price in INR has an inverse relationwith rupee.

� If the rupee appreciates (USD/INR exchange

rate decreases), INR gold price falls� If the rupee depreciates (USD/INR exchange

rate increases), INR gold price goes up.



� Consider an imaginary scenario whereinternational price of gold appreciates by 50%,

say gold moves to $1500.� Lets presume that the Indian Rupee

appreciates by about 20%, say USD/INR ratebecomes 40.

� Gold price in INR will be approximatelyrs.19500.

� You can see that despite international gold

price appreciating by 50%,� Indian gold price appreciates by only 20%,

from 16300 to 19500.



� Gold should generally move up when USD

depreciates INR should generally appreciate

against USD.

� During the last couple of years, the market

dynamics have changed quite a lot especially

after the present economic meltdown 2007.

� The gold price has not maintained direct

relation with the price of crude oil and inverse

relation with USD, which should be the casetraditionally.



USDINR 48

Commodity International Price Indian Parity

Enter value

Gold 1342.00 20,848.83

Silver 17.71 28,515.25

Platinum 1189 18349

Crude 68 3264

Natural Gas 4 192

Copper 5500 264

Zinc 1694 81

Aluminium 1750 84

Parity Calculator



EXCHANGE TRADE FUNDSEXCHANGE TRADE FUNDS

WHAT IS AN ETF?

Exchange Traded Funds (ETFs) are mutual fund

units which investors buy/sell from the stockexchange, as against a normal mutual fund unit,

where the investor buys / sells through a

distributor or directly from broker.



BENEFITS OF ETFS

Can be easily bought / sold like any other stock .

Can be bought / sold anytime during market.

No separate form filling for buying / selling units.

Ability to put limit orders.

Minimum investment.

Flexibility.



ETFS V/S STOCKS & MUTUAL FUND

FunctionalityFunctionality ETFsETFs StocksStocks MFMF

UnitUnitReal time trading and pricing throughoutReal time trading and pricing throughout

market hoursmarket hours

YesYes YesYes NoNo

Ability to put limit ordersAbility to put limit orders YesYes YesYes NoNo

Can be purchase through NSE brokerCan be purchase through NSE broker

and/or online trading a/cand/or online trading a/c

YesYes YesYes NoNo

Can be traded real time on the NSECan be traded real time on the NSE YesYes YesYes NoNo

Is Arbitrage possible between Futures andIs Arbitrage possible between Futures and

Cash MarketCash Market

YesYes YesYes NoNo

Is Diversification possible with a single unitIs Diversification possible with a single unit YesYes NoNo YesYesReturns at per with the market/indexReturns at per with the market/index YesYes NoNo NoNo

Intra day tradingIntra day trading YesYes YesYes NoNo

Paper Less investingPaper Less investing YesYes YesYes NoNo

Exit LoadExit LoadNoNo NoNo YesYes



HOW TO INVEST IN ETFS

� Trading in Gold ETF is very simple.

�

It is similar to how you trade in equity shares.� You can trade from your existing trading account with your broker or

register yourself with a broker having membership of the NSE, fill up

the KYC form, open a demat account, post margins and then

commence trading.

Select an ETFLog into your

Trading A/c or call

your NSE broker

Place an order

ETFs are in dematerialized form and settled like any other

share in the T + 2 rolling settlement.



What makes ETF an attractive investment tool?

An Index fund with

1. No subscription/redemption fees

2. Full transparency .

Listed and tradable on exchange

1. Quoted in real time.



GOLD ETF

MEANING

� Gold ETFs are units representing physical gold, which may be inpaper or dematerialized form. These units are traded on theexchange like a single stock of any company.

USES OF GOLD FTFS

� To keep Gold as part of your portfolio invest in Gold ETFS.

� Accumulate Gold for social obligations buy a Gold ETF and youcan sell them to purchase jewellery or other forms of gold whenyou desires.



ADVANTAGS OF GOLD ETF

PriceBacked by physical Gold holding of 0.995

purity

No wealth Tax

No issues & fear

It can be Listed and Traded



What is E-Gold?

Today, I would like to discuss a product called e-

gold, launched by the National Spot Exchange Ltd

(NSEL), which has the ideal combination of the

characteristics of both the forms physical andelectronic.



How does it work?

Since e-gold can purchase only in electronic formyou need to have a demate account.However your

regular demate account cannot do.You need to

open demate account with one of the DepositoryParticipant (DP) empanelled with NSEL.

Next you need to have a client account with anymember of NSEL.



Since NSEL operates on a pan-India basis

There is difference between the net selling

price and purchase cost

Ensures higher returns

They do not have to worry about theft

It takes care of purity concerns

Dematerialized form & transparency &

investment purpose

BENEFITS OF E-GOLD



IMPORTS OF GOLD

Table : India 's Imports of Gold (Quantity and Value)

Year Imports (Tonnes) Prices in (Rs. crore)

2001593.61 24156.38

2002410.29 19839.88

2003441.93 23657.52

2004591.92 35105.06

2005748.04 45811.19

2006703.91 61432.90

2007773.60 61412.50



CURRENT SCENARIO



REASONS FOR INCREASING IN GOLD

PRICES

� Shortage of Supply

� Increasing war and social unrest

�

China is adding to its gold reserves� India, which has been the largest buyer of gold

� Paper currency devaluation



W ORLD OFFICIAL GOLD

HOLDINGS MARCH 2010

RANK COUNTRY TONNES % OF RESERVE

1 UNITED STATES 8,133.5 70.4%

2 GERMANY 3,406.8 66.1%

3 IMF 3,005.3 N.A.4 ITALY 2,451.8 64.9%

5 FRANCE 2,435.4 65.7%

6 CHINA 1,054.1 1.6%

7 SWITZERLAND 1,040.1 27.1%

8 JAPAN 765.2 2.5%

9 RUSSIA 641.0 5.1%

10 NETHERLANDS 612.5 53.4%

11 INDIA 557.7 6.9%

TOP 11 GOLD CONSUMING



TOP 11 GOLD CONSUMING

COUNTRIES

RANK COUNTRY CONSUMPTION INTONNES

1 INDIA 587.1

2 UNITED STATES 349.0

3 CHINA 241.24 TURKEY 194.9

5 SAUDI ARABIA 146.2

6 UNITED ARAB EMIRATES 96.0

7 INDONESIA 78.0

8 EGYPT 75.3

9 ITALY 71.0

10 PAKISTAN 65.1

11 RUSSIA 64.5



LAST 6 MONTHS GOLD



CURRENT AFFAIRS

� India, leading gold consumer in world.

� Price taker to a Price maker

� Gold touches record high as dollar slump spurs demand

� Yesterday, gold jumped 1.6% after North Korea fired artillery at a

South Korean island and the euro plunged on concern thatEurope's debt crisis may spread

� With the US dollar under renewed pressure, gold should

continue its upwards momentum -- we forecast US$1,325/oz for

the remainder of calendar 2010

� Return on gold

(ET: 26 november 2010)

� Golden dreams

( ET: 22 november 2010)



Contd

� Gold could continue to gain into the first half of 2011

� The Australian gold sector has been the star in

the last six months-� UniCredit has upgraded their target price for

gold from $1,250 to $1,600 by the end of 2012.

� A bumper monsoon this year and growingincome of rural India is has meant that peoplein those regions are buying more gold



India in World Gold Industry

(Rounded Figures) India (In Tons) World (In Tons) % Share

Total Stocks 13000 145000 9

Central Bank

holding

400 28000 1.4

Annual Production 2 2600 0.08

Annual Recycling 100-300 1100-1200 13

Annual Demand 800 3700 22

Annual Imports 600 -- --

Annual Exports 60 -- --



COMPARISION

TODAYS RATE OF GOLD IS 1372.96 USD

INR 20160 (APPROX)



THANK YOU

finale gold[1]

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