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Old Investment in India

Old Investment in India

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Published by Sunny Jain

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Published by: Sunny Jain on Aug 18, 2011
Copyright:Attribution Non-commercial


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old Investment in India :Until 1990, the Gold Control Act forbade the private holding of gold bars in India. There was physical investment in smuggled ten tola bars, but it was limited and often amounted to keeping a few bars ready to bemade into jewellery for a family wedding. Gold investment essentiallywas in 22 carat jewellery.
Reserve Bank of India
 Since 1990, investment in small bars, both imported ten tolas andlocally-made small bars, which have proliferated from local refineries,has increased substantially. GFMS estimate that investment has exceeded 100 tonnes (3.2million oz) in some years, although it is hard to segregate true investment from stocks held by the 16,000 or more gold dealers spread across India. Certainly gold has been used toconceal wealth, especially during the mid-1990s, when the local rupee price increasedsteadily.It was also augmented in 1998 when over 40 tonnes (1.3 million oz) of gold from bondsoriginally issued by the Reserve Bank of India were restituted to the public.In the cities, however, gold is having to compete with the stock market, investment ininternet industries, and a wide range of consumer goods. In the rural areas 22 carat jewelleryremains the basic investment.
The Gold Deposit Scheme
 The government announced a new initiative in its 1999/2000 budget to tap the hoard of  private gold in India by permitting commercial banks to take gold deposits of bars, coins oewellery against payment of interest. Interest levels can be set by each bank, and depositsmust be for three to seven years. Interest and any capital gains on the gold will be exemptfrom tax. The banks can lend the gold to local fabricators or sell it in the Indian market or tolocal banks. However, the depositor has to declare the origin of the gold, so that metal bought illegally to hide wealth cannot be deposited. The State Bank of India was the first toaccept deposits. To date, the amount of gold collected under this scheme (less than 10 tonnesor 0.32 million oz) has fallen well short of the 100 tonnes (3.2 million oz) that wasmentioned when it was launched.See also:India Markets Introduction;Evolution of Modern Gold Market in India  Indians have a huge fascination for gold. This is evident in the fact that India is the largestconsumer as well as importer of gold in the world. Gold plays a very important role in the social,religious and cultural life of Indians. India Gold Market looks poised to achieve greater heightsgiven the fascination for gold in the country. India consumes about 800 MT of gold whichaccounts to about 20% consumption of gold globally. More than 50% of this is used for makinggold jewelry.
Size of India Gold Market
The domestic India gold market is estimated to be more than US$15 billion and is expected torise significantly in the coming years. During April 2008 to February 2009, gems and jewelryworth US$ 17.79 billion was exported from the country. United Arab Emirates imported morethan 30% of gems and jewelry from India, making it the largest importer from the country. HongKong was the second largest importer with 25% followed by United States with 20%. The gemand jewelry industry accounts for more than 10% of India's total commodities exports.
Gold certification in India
The government has taken steps to protect the public from buying adulterated gold; Hallmarkingof gold jewelry is one such step. Hallmarking of gold jewelry indicates the accurate finding outand official recording of the proportionate content of precious metals present in gold. Themarking is done either by laser marking machine or by punches. Hallmark is the official mark used in several countries across the world as an assurance of purity or fineness of gold jewelry.The Bureau of Indian Standard or BIS was named by the Government as the lone agency in thecountry for providing hallmarking of gold jewelry under the provisions of the BIS Act, 1986.
Indian Standard on Gold and Gold alloys
IS 1417 Grades of gold and gold alloys, Jewelry/Artefacts-Fineness and Marking
IS 1418 Assaying of Gold in Gold Bullion, Gold alloys and Gold Jewelry/ Artefacts -Cupellation (Fire Assay Method)
IS 2790 Guidelines for manufacture of 23, 22,21,18,14 and 9 carat gold alloys
IS 3095 Gold Solders for use in manufacture of Jewelry
eatures of India Gold Market
Though India is the leading consumer of gold in the world, the gold market in India is largelyfragmented and unorganized. Due to the non availability of a benchmark price, the gold prices inIndia vary very much from region to region. The festive and the wedding season in the countrywitnesses a heavy demand for gold. Despite the global economic recession, the goldconsumption in the country during these times has not abetted.
actors affecting India Gold Market
 The monsoons and the harvest of the country have a significant affect on the sale and purchase of gold in the country. Both these factors determine the amount of purchasing power that peoplewill have, which in turn decides on the amount of gold consumption and other consumptions aswell. Purchasing gold and other precious metals on occasions like Akshaya Tritiya is consideredto be auspicious.
How The Gold Market Works
Exploring the intricacies of how the gold market works would take volumes. This primer coversthe basic operation of the market and the primary indicators of activity ± essential informationfor making informed investments.
The gold market has two distinct segments. Almost all trading of physical gold takes place on theover-the-counter market (OTC), centered primarily in London, New York, and Zurich. OTCtrades are direct unstructured transactions between principals ± mining companies, central banks,and industrial consumers. The standard size of OTC gold trades ranges from 5,000 to 10,000ounces. Investors and speculators can also trade in OTC derivatives similar to those discussed below.Because physical assets are bought and sold, the current OTC gold market price is an important benchmark. The London fix - the most widely used indicator - is calculated twice daily (the AMfix and the PM fix).
And Into the
What most people think of as the gold market is actually the gold futures market, the trade thattakes place on exchanges such as the Commodity Exchange (COMEX) division of the New York Mercantile Exchange (NYMEX), the Chicago Board of Trade (CBOT), and the TokyoCommodity Exchange (TOCOM). Investors in these exchanges speculate on the movement of the price of gold. The principal indicator is the spot price - the quote price for gold to bedelivered and paid for on the settlement date two days into the future. The spot price is heavilyinfluenced by the London fix.
Exit Gold, Enter Paper
, instruments that settle further into the future than the spot settlement date, wereintroduced into the gold market to hedge against adverse movement in the spot price. There aretwo basic types of derivatives, although each has numerous complicated variations.

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