Gold

Presented by
Raveendhar.k Sathish thalabowdi

Introduction:
vGold is the oldest precious metal known to man. vTherefore, it is a timely subject for several reasons. vIt is the opinion of the more objective market experts that the traditional investment vehicles of stocks and bonds are in the areas of their all-time highs and maybe due for a severe correction. vTo fully appreciate why 8,000 years of experience say " gold is forever", we should review why the world reveres what England's most famous economist, John Maynard Keynes, cynically called the "barbarous relic."

Contd..,
  

Gold is primarily a monetary asset and partly a commodity. More than two thirds of gold's total accumulated holdings account as 'value for investment' with central bank reserves, private players and high-carat Jewellery. Less than one third of gold's total accumulated holdings is as a 'commodity' for Jewellery in Western markets and usage in industry. The Gold market is highly liquid and gold held by central banks, other major institutions and retail Jewellery keep coming back to the market. Due to large stocks of Gold as against its demand, it is argued that the core driver of the real price of gold is stock equilibrium rather than flow equilibrium. Economic forces that determine the price of gold are different from, and in many cases opposed to the forces that influence most financial assets. South Africa is the world's largest gold producer with 394 tons in 2001, followed by US and Australia. India is the world's largest gold consumer with an annual demand of 800 tons.

Global scenario:

Supply

Gold mine production in 2008
1. China: 288mt (1) 2. United States: 234mt (1) 3. South Africa: 232mt (1) 4. Australia: 225mt 5. Peru: 175mt 6. Russia: 163.9 mt 7. Canada: 100mt 8. Indonesia: 90mt 9. Uzbekistan 85mt 10. Ghana 81mt Other: 660mt TOTAL: 2356m

World Gold Production Vs South Africa (Million Ounces)

Indian scenario:

Indian Gold (tonnes) and Prices (rupees)

Indian Gold Demand in tones and rupee gold price

Gold jewellery export from India

GMTR of gold

World major markets
 London

as the great clearing house  New York as the home of futures trading  Zurich as a physical turntable  Istanbul, Dubai, Singapore and Hong Kong as doorways to important consuming regions  Tokyo where TOCOM sets the mood of Japan  Mumbai under India's liberalized gold regime i

Spot market prices:

Gold future market
Gold 10 grams Gold guinea 8 grams

New York NYMCE futures

Gold ETF

Exchange Traded Funds are passively managed funds tracking a benchmark index and reflect the performance of that index. They have the flexibility of trading on stock exchanges like a share and offer best features of open and close end funds.

Market Moving Factors
Above ground supply from sales by central banks, reclaimed scrap and official gold loans  Producer / miner hedging interest  World macro-economic factors - US Dollar, Interest rate  Comparative returns on stock markets  Domestic demand based on monsoon and agricultural output

Constraints in Development of Commodity
Exchange rate fluctuation.  Seasonality of Demand.  Purity of Gold Ornaments.  Increase cost of production in Gold mines.  Decline in the Gold mine production.  Demand exhibits income elasticity, particularly in the rural and semi-urban areas

MMTC’S BULLION SUPPLY SCHEMES

U want to know how to buy..

FOR SALES TO DOMESTIC USERS:

- On Loan
ØTo register themselves with MMTC ØBank guarantee covering 110% notional value ØLoan is for 90 days.

- On Outright Basis
ØTo register themselves with MMTC ØDemand draft/ banker's cheque/ etc ØDelivery of material after receipt of the amount in MMTC's bank account.

Contd..,
- On Loan

FOR EXPORTERS:

ØBank Guarantees of required values covering cost of gold Ørepaid and exported within prescribed days as per Foreign Trade Policy

- Outright Basis

Øthe notional value of gold (in the form of DD/Banker’s cheque/ High value cheque) Øexporter against payment of the differential

Ø- On Replenishment Basis
ØThe quantity of precious metal booked shall be equivalent to the precious metal content in the exported product and the admissible wastage. Øinitial deposit of 20%

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