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Gold

Gold. Contents. General Facts Why invest in Gold? Price Determining factors for gold Economic Indicators Impacting Gold Prices Gold Demand in India Research Support. Why Invest in Gold? . Gold is a foundation asset within any long term savings or investment portfolio.

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Gold

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  1. Gold

  2. Contents • General Facts • Why invest in Gold? • Price Determining factors for gold • Economic Indicators Impacting Gold Prices • Gold Demand in India • Research Support

  3. Why Invest in Gold? • Gold is a foundation asset within any long term savings or investment portfolio. • One of the few financial assets that do not rely on an issuer's promise to pay. • It offers investors insurance against extreme movements in the value of other asset classes.

  4. General Facts • 60% of gold mined becomes jewelry. • 394% increase in the price of gold from Dec 2000 to October 2010. • 22 times gold has reached new highs in 2010. • 100 million people depend on gold mining for their livelihood. • 2nd quarter gold demand was 919.9 tonnes, worth USD$44.5bn.

  5. Gold Demand : Sector wise

  6. Gold Demand : Year wise Year

  7. Demand & Supply Q2 2011

  8. What moves Gold prices? • Central Banks’ purchases/sales. • Hedge against financial stress. • Jewelery and Industrial demand. • Gold mining Production and Supply. • War, invasion and economic uncertainty.

  9. Central Banks • Central banks and IMF play an important role in the gold price. • Interest rates are closely related to the price of gold. • Gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates. • India stands 11th in Gold Holdings with 557.7 tonnes. • Central bank activity among the VIST (Vietnam, Indonesia, South Korea and Thailand) nations in terms of gold holdings increased by 28% in 2011.

  10. Hedge against financial Stress • Gold can be used as a hedge against inflation, deflation or currency devaluation. • Within the current economic scenario, countries are faced with huge deficits and more money that is pumped into these economies – the printing of money basically – then less valuable the currencies become. • If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative & safe investments increases.

  11. Jewelry and Industrial demand • Jewelry accounts for over two-third of annual global demand. • India is the largest consumer of gold Jewelry followed by China and the U.S. • Industrial, dentistry and medical uses account for around 12% of gold demand.

  12. Gold Mining Production and Supply • The mining production rose by 7 percent to 708.8 tonnes in 2nd quarter 2011. • Producer de-hedging exerted a modest negative influence on supply in second quarter. • Recycling activity was 3% down year-on-year, as consumers in many markets held off on selling their existing 'loose' holdings of gold in anticipation of higher prices. • The completion of de-hedging by world’s two miners Barrick Gold mine and Anglo Ashanti Gold mine reduces the possibility of a price rise as seen in 2009 and 2010.

  13. War, Invasion and Economic uncertainty • In times of war or in terms of economic uncertainty, people fear that their assets may reduce in value, that the currency may become worthless. • Governments/people believe that Gold is a solid asset which will buy food/ transportation etc. or that it can be used as an alternate currency during such periods of uncertainty.

  14. Gold @$765 Gold @ $1200 Global Financial crisis in Sept ’08: Lehman Brothers collapse Sovereign Debt crisis in Greece during late 2009 Gold @$1500 Gold @$1700 U.S debt ceiling crisis worsens towards end of July 2011. Standard and Poor (S&P) downgrades U.S credit rating in August 2011 Gold @$1800 Standard and Poor (S&P) downgrades Italy’s credit rating in September 2011 Greece on verge of 98 percent default in September 2011

  15. Economic Indicators Impacting Gold Prices • GDP • Non Farm Payrolls • Industrial Manufacturing Data • Business Inventories • Value of U.S dollar • Economic Stimulus package if announced • Trade deficit

  16. Returns on Asset classes (Y-o-Y)

  17. Spot Gold v MCX Gold (3 Year Trend) Spot Gold Going hand in hand MCX Gold

  18. Spot Gold v Dollar (3 Year Trend) Spot Gold Dollar Negative Correlation

  19. Gold Demand in India • Gold demand in India will continue to be robust in the next decade… WGC • The cumulative annual demand will be in excess of 1,200 tonnes by 2020, valued at about Rs 2,50,000 crores. • According to the World Gold Council (WGC) report for 2nd quarter 2011, the demand for gold in India would be driven by rapid GDP growth, urbanization and rise in income and savings levels of the consumer.

  20. Gold jewelry represented around 75 per cent of the total Indian gold demand in 2010. • The southern states like Kerala, Andhra Pradesh, Tamil Nadu and Karnataka account for over 40 per cent of the country's gold demand. • The research highlights that with 50 per cent of the Indian population under 25 and approximately 150 million weddings anticipated over the next decade, which will drive gold consumption. • Source: World Gold Council

  21. Types of Investments • Physical • Jewelery • Bars/Coins • Non Physical • Gold mining shares • ETFs • Futures(can be converted into physical) • E Gold (can be converted into physical)

  22. Gold is also VOLATILE……

  23. Common Man : Wedding Assume that on September 30th, John Thomas fixed his daughter Christina Johan’s wedding to be on 2012 May 6th, and that he plans to buy 25 pavan (200 g) gold as jewelry. • Block only less than 50,000 as margin amt (at present prices) • Invest the rest of 5 lacs in bank or other safe assets for 1 month. • Hold the gold in demat form, maintain MTM. • Block over 5.5 lacs (at present level). • Risk the possibility of a price fall later.

  24. P/L scenario @ End of April 2012 for MCX Gold purchase @2750 Note: This notional loss from futures can be reduced or nullified. Standing instruction can be given to exit futures if price fall below 2700 (or suitable prices), so that the loss is limited to Rs.10000 or even much lower. The flexibility of easy entry and exit available through online futures trading platform, enables even better strategies than that mentioned above.

  25. Jeweler Scenario: Risks on both directions due to high volatility. • Advance booking by customers • Commitment to suppliers • Avoid distress sales or purchases • Reduce losses • Make modest gains

  26. Research Support USE our research to know about major trends, entry/exit points etc. • Daily Gold report • Strategies (Short term as well as long term) for both International as well as MCX Gold • News Alert : Both Indian as well as International • Technical Analysis and Charts • Customer support through phone, sms, email, website

  27. Spotting the top of the rally • It is every analyst / trader’s dream to “pick” the “top” of a rally. • Geojit Comtrade’s Research did just that. (Refer our gold reports in August 2011)

  28. Advantages of Gold Futures (MCX) platform • Online Terminal (View/Trade at the comfort of your home/office) • High depth/liquidity (MCX is no: 1 in India and no: 2 in world as per its website.) • Different denominations available (1kg, 100g, 8g, 1g). • Trading hours (10am to 11 30pm) covers all major mkts. • Take/give delivery if you want. • Store/Sell from demat. • Margins as low as 4 to 7%

  29. Pedigree • Constituted by staff from erstwhile Geojit Commodities and other industry stalwarts. GEOJITCOMMODITIES • Number 1 Broking house status in terms of Trading Terminals : Dun & Bradstreet Survey 2008 • The first brokerage to offer online trading in Rubber (Mar 2003), Pepper (Apr2003), Gold (Oct2003), Wheat and Rice (Dec2003), Cardamom (Apr 2004) and Coffee (Feb2006) • Brand image of Industry Pioneer since inception of commodity futures in 2003

  30. Geojit Comtrade : Increasing investor awareness/education • Daily, weekly and special reports on various commodities & currencies covering both international as well as domestic markets. • Seminars and workshops designed to help both the new clients as well as experienced traders. • Increased media spending to make ourselves more visible in print, visual as well as digital media, so that our reports and views reach better to our investors. • Offers SMS / email reports at no additional cost.

  31. Latest advancements • Geojit’s “Flip Ultimate”, which has integrated the three major national level exchanges : MCX, NCDEX & NMCE on to a single platform.  • Mobile Trading in commodities for the first time in NCDEX/NMCE. • Facility to trade in International Markets.  • One touch terminals.

  32. Door No. XXXVI/1567, Canal Road, Kaloor, Kochi, India-682016, Phone: +91 484 2401224/5, Fax: +91 484 2402482 Email: customercare@geojitcomtrade.com Web: www.geojitcomtrade.com MCX Member code: 40220  FMC No.: MCX/TCM/CORP/1710, NCDEX Member code : 00920  FMC No.:NCDEX/TCM/CORP/0895, NMCE Member code : CL0324  FMC No.: NMCE/TCM/CORP/0245, NSEL Member Code : 12770

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