Upload
abhinavreliancelife
View
111
Download
1
Embed Size (px)
Citation preview
PROJECT REPORT ON
“AN ANALYTICAL STUDY OF GOLD AND GOLD ETF’s AS AN INVESTMENT OPTION’’
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE COURSE
MASTER OF MANAGEMENT STUDIES
UNIVERSITY OF MUMBAI
SUBMITTED BY
ROSHAN BANGERA
ROLL NO: 2009 03
BATCH: 2009-2011
SPECIALISATION: FINANCE
UNDER THE GUIDANCE OF
PROF:ANJALI KULKARNI
VISHWESHWAR EDUCATION SOCIETY’S
INDIRA INSTITUTE OF BUSINESS MANAGEMENT
SANPADA, NAVI MUMBAI
Indira Institute Of Business Management Page 1
INDEX
CHAPTER CONTENT PAGE NO
EXCECUTIVE SUMMARY 2
1 INTRODUCTION 3-4
2 COMPANY OVERVIEW 5-10
3 CONCEPTUAL BACKGROUND
1. Industry Overview
2. Indian Commodity Market
3. Commodity Trading
4. Commodity-Gold
5. Terminologies in Gold Market
11-32
4 OBJECTIVE 33
5 RESEARCH METHODOLOGY 34
6 DATA ANALYSIS AND INTERPRETATION
1. Gold as an Oppurtunity
2. Gold ETFs as an Oppurtunity
3. Gold V/S Gold ETFs
4. Gold V/S Stock
5. Investment Pattern and Preference
35-56
7 CONCLUSION 58-59
8 BIBLOGRAPHY 60
Indira Institute Of Business Management Page 2
EXECUTIVE SUMMARY
This project gives emphasis on the trading strategies which are followed by different trading
firms and brokers and also it gives emphasis on how different factors like inflation affects the
price of gold. This will include learning of the gold market in detail how the market started,
what was the need behind creating such markets, who regulates this market, what is the
minimum requirement, etc. The main idea behind this market research is to gain basic idea what
strategies different trading firms and brokers use to gain maximum profit .
Globally there are ExchangeTraded Funds( ETFs) on Silver, Gold, Indices. Gold ETFs are a
special type of ETF which invests in Gold and Gold related securities. Investors can buy G-
ETF units from secondary markets either from the quantity being sold by the APs or by
other retail investors.
Indira Institute Of Business Management Page 3
1) INTRODUCTION
India was mainly characterized by people who saves and saves-heavily. It was the country of
savers. But post-independence the growth has picked its pace and also is the rate of inflation.
Prices of essential commodities like food, housing, gas, electricity, education etc has been
increasing at a dramatic pace of more than 9%. This is one of the biggest disadvantage of a
growing economy, inflation rate seems to fly like a limitless bull. Investment is required to fight
inflation and in addition make your money grow.
INDIA AS INVESTMENT PERSPECTIVE
India is viewed as investment opportunity by Indian Investors and Foriegn investors as they are
confident in the future growth prospects of India. This confidence is fueled by a consistent GDP
growth of around 8%to 8.5%. Average performance of various asset class is as listed below:
Savings account (3% to 3.5%)
Bonds (6% to 7%)
Bank or Companies Deposits (6% to 7%)
Gold (8% to 10%)
Real Estate (10% to 12%)
Stocks (12% to 15%)
Art (15% to 20%)
Short term investment horizon and GDP growth which is almost assured at 8% to 8.5% the
focus on investors in Indian market shall be more on selecting a suitable asset class for
investment rather than debating of growth and risks of investment. India will grow and top brains
are convinced and assures average retail investors of this growth scene
Gold is primarily a monetary asset and partly a commodity.
Indira Institute Of Business Management Page 4
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.
Gold ETFs are transparent investment vehicles that will have to conform to rigid regulations on
investment norms and valuations.
Gold ETFs allow investment in gold in small denominations, which makes it easier for the retail
investor to participate.
Indira Institute Of Business Management Page 5
2) COMPANY PROFILE
STERLING FINANCIAL SERVICES
A financial powerhouse Sterling Financial Services Established in the year 2001 started with
corporate financing i.e. bill discounting. With a basket of services across all verticals in finance,
Sterling Financial Services offers you the perfect blend of financial services right from Equity
Broking, Advisory Services that cover Portfolio Management Services, Mutual Fund
Investments, and Insurance.
Sterling Financial Services believes in being technologically advanced so that we can offer you –
our tech-savvy customers - an integrated and innovative platform to trade online.
Sterling Financial Services is affiliated with NSE, BSE and MCX.
PRODUCTS OFFERED UNDER STERLING FINANCIAL SERVICES
LIFE INSURANCE
HDFC Standard Life Insurance, Birla Sun life Insurance,LIC,ICICI Prudential Life Insurance.
GENERAL INSURANCE
Mediclaim, Vehicle, Personal accident, Fire Insurance
DEPOSITS
Company deposits, Postal savings , HDFC Ltd Deposits, RBI Relief Bonds, Tax Saving Bond.
LOANS
Home Loans,Personal Loans
Indira Institute Of Business Management Page 6
CORPORATE FINANCE
Bills Discounting, Intercorporate Deposits
MUTUAL FUNDS
HDFC,Franklin, HSBC, BIRLA Sunlife, Reliance, DSP, ICICIetc
EQUITY TRADING/DERIVATIVES
Buying selling of shares on BSE NSE, Derivatives.
SERVICES TO THE CUSTOMERS
EQUITY
Autorized and Registered SubBroker of ICICI for Equity and Derivatives.
Trading in shares :
Sterling Financial Services offers you various options while trading in shares
Cash Trading :
This is a delivery based trading system, which is generally done with the intention of taking
delivery of shares or monies
Margin Trading :
You can also do an intra-settlement trading upto 3 to 4 times your available funds, wherein you
take long buy/ short sell positions in stocks with the intention of squaring off the position within
the same day settlement cycle
MarginPLUS Trading : Through MarginPLUS you can do an intra-settlement trading upto 25
Indira Institute Of Business Management Page 7
times your available funds, wherein you take long buy/ short sell positions in stocks with the
intention of squaring off the position within the same day settlement cycle. MarginPLUS will
give a much higher leverage in your account against your limits
Trading on NSE/BSE :
Through ICICIdirect.com, you can trade on NSE as well as BSE
Market Order :
You could trade by placing market orders during market hours that allows you to trade at the
best obtainable price in the market at the time of execution of the order
Limit Order : Allows you to place a buy/sell order at a price defined by you. The execution can
happen at a price more favorable than the price, which is defined by you, limit orders can be
placed by you during holidays & non market hours too.
DERIVATIVES
FUTURES
Through ICICIdirect.com, you can now trade in index and stock futures on the NSE. In futures
trading, you take buy/sell positions in index or stock(s) contracts having a longer contract period
of up to 3 months
Trading in FUTURES is simple! If, during the course of the contract life, the price moves in
your favour (i.e. rises in case you have a buy position or falls in case you have a sell position),
you make a profit
Presently only selected stocks, which meet the criteria on liquidity and volume, have been
enabled for futures trading
Indira Institute Of Business Management Page 8
Calculate Index and Know your Margin are tools to help you in calculating your margin
requirements and also the index & stock price movements. The ICICIDIRECT UNIVERSITY
on the HOME page is a comprehensive guide on futures and options trading
OPTIONS
An option is a contract, which gives the buyer the right to buy or sell shares at a specific price,
on or before a specific date. For this, the buyer has to pay to the seller some money, which is
called premium. There is no obligation on the buyer to complete the transaction if the price is
not favorable to him
To take the buy/sell position on index/stock options, you have to place certain % of order value
as margin. With options trading, you can leverage on your trading limit by taking buy/sell
positions much more than what you could have taken in cash segment
The Buyer of a Call Option has the Right but not the Obligation to Purchase the Underlying
Asset at the specified strike price by paying a premium whereas the Seller of the Call has the
obligation of selling the Underlying Asset at the specified Strike price
The Buyer of a Put Option has the Right but not the Obligation to Sell the Underlying Asset at
the specified strike price by paying a premium whereas the Seller of the Put has the obligation of
Buying the Underlying Asset at the specified Strike price
By paying lesser amount of premium, you can create positions under OPTIONS and take
advantage of more trading opportunities.
Indira Institute Of Business Management Page 9
LIFE INSURANCE
Sterling Financial Services has a wide array of insurance plans that have been designed with the
philosophy that different individuals are bound to have differing insurance needs.
The ideal insurance plan is one that addresses the exact insurance needs of the individual that
will depend on the age and life stage of the individual apart from a host of other factors
COMMODITY
Indian markets have recently thrown open a new avenue for retail investors and traders to
participate: commodity derivatives. For those who want to diversify their portfolios beyond
shares, bonds and real estate, commodities are the best option.
Sterling Financial Services With a perfect blend of philosophy, knowledge and highly skilled and
dedicated professionals it strives to offer its client the best investment solutions.
MUTUAL FUNDS
Mutual Funds are that alternative which offers the ideal platform to participate in the Equity &
Debt market indirectly through Sterling Financial Services .
With variety of mutual fund plans we meet long term and short term financial aspects.
It is a financial one stop shop.
3) CONCEPTUAL BACKGROUNDIndira Institute Of Business Management Page 10
3.1 INDUSTRY OVERVIEW
The transition form a "nation that only saves" to a "nation of investors" is evident. Taking
the statistics of last 35years, the number of retail as well as institutional investors in India
has multiplied several folds.
Not only Indian investors but international investors is eying India as an Investment
heaven. Only next to China, India has been rates as the fastest growing economies in
recent times. India has learned to differentiate between saving and investment. If earning
money is a need then savings and investment should be a habit. Savings in isolation is not
of much help because inflation is eating our money.
Inflation makes our money less powerful each day. This is the reason why we need to
fight inflation (to protect our money) by a great tool called investment. India is growing
and a person who is investing is actually contributing to the growth of the nation; in
return he/she will get the desired returns.
Important is to identify a suitable "asset class" for oneself and start investing in it. Like
retired people would like to invest in bonds, deposits; middle aged men would like to
invest in mutual funds, real estate but people who are young and dynamic would like to
invest in direct equity like stocks.
This an opportunity for all Indians and overseas investors to invest heavily and bank on
India growth. Investors should buy assets whether it is stocks, real estate etc focusing on
long term perspective.
The reasons are because India is the largest democracy in the world, politically stable.A
resilient economy with a wide base of agriculture, mining, manufacturing &
services.Country on a high growth path & moving rapidly towards a free market
economy – the liberalisation & reforms process has gathered momentum.Huge domestic
consumer market – 1050 million population including 270 million classified as middle
class
Diversity of cultures co-existing in harmony.2nd largest pool of English speaking
scientists, technical & IT manpower after USA.Reservoir of natural resources – oil, gas,
coal, iron ore & other minerals.Cost effective labour & low cost of living.Well
Indira Institute Of Business Management Page 11
established financial system – capital & money markets, banking, mutual funds, leasing,
general & personal insurance.
INVESTMENT OPTIONS AVAILABLE IN INDIA
As stated earlier, the investment industry is huge; therefore the types of investments are also
varied. Different types of investments are:
Cash investments: Cash investments comprise of savings bank accounts, certificates of deposit
(CDs) and treasury bills (TBs). All these types of investments render a low interest rate and
prove to be quite risky during times of inflation.
Debt securities: This type of investment gives returns in the form of fixed periodic payments
and the fixed capital appreciate at maturity. This is safe bait for the investors in the investment
industry and has always proved to be the risk free investment tool. Though, it is generally low in
risks, the returns are also lower than the other peer securities
.
Stocks:Investors can also buy stocks (equities) from the secondary markets and be a part of any
business corporates that are listed in the bourses. By this way, one can become the part of the
profits that the company generates. But one should remember that stocks are generally more
volatile and carries more risk than bonds
.
Mutual funds:They are usually a collection of stocks and bonds that a fund manager selects for
an investor such that the returns are maximum. The investor does not have to track the
investment, be it a bond, stock- or index-based mutual funds
Derivatives: Derivatives are financial contracts, whose value is derived from the value of the
underlying assets like equities, commodities and bonds. They can take the form of futures,
Indira Institute Of Business Management Page 12
options and swaps. Investors choose derivatives as they are used to minimize the risk of loss that
result from variations in the underlying asset values.
Commodities: The items that are traded on the commodities market are agricultural and
industrial commodities and they need to be standardized. Commodities trading have always been
giving high returns and thus they are the riskiest of all investment options. One, who trades in
commodities, requires specialized knowledge and analytical capabilities
Real estate: Investing in real estate has to be a long term affair. Funds get hooked into the real
estate sector for a considerable time period.
3.2) INDIAN COMMODITY MARKET
India commodity market consists of both the retail and the wholesale market in the country. The
commodity market in India facilitates multi commodity exchange within and outside the country
Indira Institute Of Business Management Page 13
based on requirements. Commodity trading is one facility that investors can explore for investing
their money. The India Commodity market has undergone lots of changes due to the changing
global economic scenario; thus throwing up many opportunities in the process. Demand for
commodities both in the domestic and global market is estimated to grow by four times than the
demand currently is by the next five years.
INDIAN COMMODITY MARKET - GLOBAL SCENARIO
Despite having a robust economy, India's share in the global commodity market is not as big as
estimated. Except gold the share in other sectors of the commodity market is not very significant.
India accounts for 3% of the global oil demands and 2% of global copper demands. In
agriculture India's contribution to international trade volume is rather less compared to the huge
production base available. Various infrastructure development projects that are being undertaken
in India are being seen as a key growth driver in the coming days
WHOLESALE MARKET
The wholesale market in India, an important component of the India commodity market,
traditionally dealt with framers and manufacturers of goods. However, in the present scenario,
their roles have changed to a large extent due to the enormous growth that the economy has
witnessed. The lengthy process of wholesalers buying from manufacturers; then selling it to
retailers who in turn sold it to consumers does not seem feasible today. An improvement in the
transport facility has made the interaction between the retailer and manufacturer easier; the need
for a wholesale market is gradually diminishing.
.RETAILMARKET
The retail market in India is currently witnessing a boom. The growth in the India commodity
market is largely attributed to this boom in the retail market. Policy reforms and liberal
government policies have ensured that this sector is growing at a good pace. Some of the reasons
attributed to the growth of retail sector in India include the large population of the country who
has an increased purchasing power in their hand. Another factor is the heavy inflow of foreign
Indira Institute Of Business Management Page 14
direct investment in this sector. More than 80% of the retail industry in the country is
concentrated in large cities.
3.3) COMMODITY TRADING
Commodity trading is an interesting option for those who wish to diversify from the traditional
Indira Institute Of Business Management Page 15
options like shares, bonds and portfolios. The Government has made almost all commodities
entitled for futures trading. Three multi commodity exchanges have been set up in the country to
facilitate this for the retail investors. The three national exchanges in India are:
Multi Commodity Exchange (MCX)
National Commodity and Derivatives Exchange (NCDEX)
National Multi-Commodity Exchange (NMCE)
Commodity trading in India is still at its early days and thus requires an aggressive growth plan
with innovative ideas. Liberal policies in commodity trading will definitely boost the commodity
trading. The commodities and future market in the country is regulated by Forward Markets
commission (FMC).
MCX (MULTI COMMODITY EXCHANGE):
Multi Commodity Exchange of India Ltd, (MCX) an independent and de-metalized multi
commodity exchange, has permanent recognition from the Government of India. MCX, a
state-of-the-art nationwide, digital exchange facilitates online trading, clearing and settlement
operations for a commodities futures trading. Key shareholders of MCX are Financial
Technologies (India) Ltd, State Bank of India, Union Bank of India, Bank of India,
Corporation Bank & Canara Bank. Headquartered in Mumbai, MCX is led by an expert
management team with deep domain knowledge of the commodity futures markets and has
successfully established a thriving digital market for trading in Gold, Silver, Steel, Kapas,
Cotton, Rubber, Black Pepper, Oil & Oil Seeds, Ferrous and Non-Ferrous Metals, Agri
Commodities, Pulses and Soft commodities
MCX now stands amongst the top five bullion exchanges in the world and the largest gold
futures exchange in India. Between November 11, 2003 and August 12, 2004, MCX has
clocked a total Gold turnover of more than 340 tons valued at around Rs. 20,000 crores, which
accounts for 90 per cent of the gold futures trading in the country. MCX offers two types of
contract in Gold i.e. Gold (1 Kg) and Gold Mini (100 Gms) facilitating a large spectrum of
market participants to do trading. MCX has also recorded Gold physical delivery in numerous
contracts to the extent of 1.5 quintals.
Indira Institute Of Business Management Page 16
NCDEX (NATIONAL COMMODITY & DERIVATIVE EXCHANGE
LIMITED):
National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally
managed on-line multi commodity exchange. The shareholders are :
Promoter shareholders: Life Insurance Corporation of India (LIC), National Bank for
Agriculture and Rural Development (NABARD) and National Stock Exchange of India
Limited(NSE) .
Other shareholders: Canara Bank, CRISIL Limited (formerly the Credit Rating
Information Services of India Limited), Goldman Sachs, Intercontinental Exchange (ICE),
Indian Farmers Fertilizer Cooperative Limited (IFFCO) and Punjab National Bank (PNB).
NCDEX is the only commodity exchange in the country promoted by national level
institutions. This unique parentage enables it to offer a bouquet of benefits, which are
currently in short supply in the commodity markets. The institutional promoters and
shareholders of NCDEX are prominent players in their respective fields and bring with
them institutional building experience, trust, nationwide reach, technology and risk
management skills.
NCDEX is a public limited company incorporated on April 23, 2003 under the Companies
Act, 1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It
commenced its operations on December 15, 2003.
NCDEX is a nation-level, technology driven de-mutualised on-line commodity exchange
with an independent Board of Directors and professional management - both not having any
Indira Institute Of Business Management Page 17
vested interest in commodity markets. It is committed to provide a world-class commodity
exchange platform for market participants to trade in a wide spectrum of commodity
derivatives driven by best global practices, professionalism and transparency.
NCDEX is regulated by Forward Markets Commission. NCDEX is subjected to various
laws of the land like the Forward Contracts (Regulation) Act, Companies Act, Stamp Act,
Contract Act and various other legislations.
NCDEX is located in Mumbai and offers facilities to its members about 550 centers
throughout India. The reach will gradually be expanded to more centers.
NCDEX currently facilitates trading of 57 commodities.
GOLD CERTIFICATION IN INDIA
Gold is a physical asset its value is based on its purity so to protect customers from any
manupalation government has introduce hallmarking wherein certain standards is given to
the gold based on its purity so that the customers do not suffer.
The government has taken steps to protect the public from buying adulterated gold;
Hallmarking of gold jewelry is one such step. Hallmarking of gold jewelry indicates the
accurate finding out and official recording of the proportionate content of precious
metals present in gold. The marking 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 the country for providing hallmarking of gold jewelry under the provisions of
the BIS Act, 1986.
Indira Institute Of Business Management Page 18
INDIAN STANDARD 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
MEASUREMENT
Weight Conversion Table
To Convert from To Multiply by
Troy Ounce Grams 31.1035
Grams Troy Ounce 0.0321507
Kilograms Troy Ounce 32.1507
Kilograms Tolas 85.755
Purity
Gold purity is mekarat asured in terms of karats and fineness
Karat:Pure gold is defined as 24
Fineness: Parts per thousand thus 18 karat = (18/24)th of 1000 parts =750 fineness
Indira Institute Of Business Management Page 19
TRADING OF GOLD ETFs
Just like you trade in shares. You will need to have a demat account. Also, you need to register
yourself with a broker having membership of the NSE.
Once these GETFs are listed the daily movement in their prices can be checked online like the
way you keep track of your equity portfolio.
The price of GETF unit will track the price of physical gold in the international market like the
London Bullion Market association.
Listing on the NSE will help the buyers and sellers meet on a single platform for trading in
GETFs. This will enable them convert their units into cash easily.
BROKERAGE CHARGES
The brokerage charges here are not too high. It ranges from 0.4 per cent to 0.6 per cent of your
transaction value.
IOt would be Rs 4 to Rs 6 as brokerage charges if you buy units worth Rs 10,000.
TAXES
Since GETFs are being sold as non-equity there is no buying/selling of shares schemes there will
be dividend distribution tax (DDT) .
Dividend will be taxable in the hands of investors if and when these GETFs declare dividends.
dividend is money distributed to unit holders if the scheme declares a profit.
Current law stipulates DDT of a shade over 14 per cent for individual investors and a shade
below 22.5 per cent for corporate investors. This tax is inclusive of surcharge and education cess
(a type of tax).
Indira Institute Of Business Management Page 20
GUARANTEE ABOUT THE PURITY OF GOLD BOUGHT
The custodians appointed by both Benchmark Mutual Fund and UTI Mutual Fund. Both the
mutual funds have appointed the Bank of Nova Scotia as the custodian (safe keeper) for the gold
bought on behalf of investors.
The amount of physical gold held by the custodians in both these schemes will be of fineness
(purity) of 99 parts per 1000. In other words, this gold will be 99.5 per cent pure. We call this
degree of purity as 24 carat gold in general parlance.
What's more the gold held with the custodian will be fully insured and will not be used for
lending.
3.4) COMMODITY-GOLD
Gold is the oldest precious metal known to man and for thousands of years it has been valued as
a global currency, a commodity, an investment and simply an object of beauty.
MAJOR CHARACTERISTICS
Indira Institute Of Business Management Page 21
Gold is unique as it is both a commodity and a monetary asset.
Its stability and high value makes it virtually indestructible and ensures that it is almost
always recovered and recycled.
There is no true consumption of gold in the economic sense as the stock of gold remains
essentially constant while ownership shifts from one party to another.
Although gold mine production is relatively inelastic, recycled gold or scrap ensures
there is a potential source of easily traded supply when needed, and this helps to
stabilize gold price.
Economic forces that determine the price of gold are different from, and in many cases
opposed to the forces that influence most financial assets.
“Gold is a very solid asset. Buying physical gold does have advantages compared with other
investments. Investments in gold-backed financial products and paper gold should be left up to
the professionals," says Mark Robinson, a bullion analyst based in Dubai
.
Gold is the oldest precious metal known to man. Therefore, it is a timely subject for several
reasons. It 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 may be due for a severe
correction.
Why gold is "good as gold" is an intriguing question. However, we think that the more pragmatic
ancient Egyptians were perhaps more accurate in observing that gold's value was a function of its
pleasing physical characteristics and its scarcity.
CHARACTERSTICS OF GOLD
Durable
– The most malleable and ductile element
Indira Institute Of Business Management Page 22
Consistent
– A 995 Gold purity level is identical at all places
Valuable
– Gold is Precious, is a rare metal and hence Valuable.
Low Risk
– Gold is not subject to the risk of bankruptcy or default
– Gold cannot be created at will and it is real
GLOBAL SUPPLY and DEMAND SCENARIO
The total above ground stocks of gold is estimated to be around 1,63,000 tones by Gold Fields
Minerals Services (GFMS) as on end of 2008
Out of this total stock, 51% is estimated to be present as jewelers, 18% as official reserves,
17% held as investment, 12% used for industrial purposes and 2% is unaccounted for.
Jewelers accounts for almost two-thirds of annual gold demand with investment and industry
being the other main drivers. The total annual global demand for gold has averaged 3530 tones
Indira Institute Of Business Management Page 23
in the last three years (2005 - 2008). However, it is expected to dip slightly in 2009, owing to
the sharp rise in prices.
Five countries, viz., India, China, USA, Turkey, Saudi Arabia and UAE account for above
60% of gold demand, with each market driven by a different set of socio-economic and
cultural factors.
The total global mine production is relatively stable, averaging approximately 2,455 tons per
year over the last three years. Recycling of old gold scrap and official sector sales are the other
major sources of supply, which have averaged 1084 tones and 378 tons in the last three years.
South Africa has been a major gold producer since 1880s and it is estimated that about 50% of
all gold ever produced has come from this nation. While, during the early 1980's it produced
about 1000 tones, the output in 2007 dropped to just 272 tones.
China with a production of 276 tones overtook South Africa as the world's largest gold
producer in 2007 for the first time since 1905 that South Africa has not been the largest. The
other major producers are USA,
Australia, Russia and Peru.
WORLD GOLD MARKETS
OTC markets at London(LBMA) New York and Zurich
Gold derivative exchanges at New York-CME(COMEX), Tokoyo(TOCOM),Mumbai(MCX)
Istanbul , Dubai, HongKong and Singapore to are doorways to important consuming regions.
London as the great clearing house
New York as the home of futures trading
Indira Institute Of Business Management Page 24
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
INDIA IN WORLD GOLD INDUSTRY
(Rounded Figures) India (In Tons) World (In Tons) % Share
(Rounded Figures) India (In Tons) World (In Tons) % Share
Total Stocks 15000 160000 9
Central Bank holding 558 30,100 2
Annual Production 3 2450 0
Indira Institute Of Business Management Page 25
Annual Recycling 250 1100 23
Annual Demand 700 3550 20
Annual Imports 600 --- ---
Annual Exports 60 --- ---
INDIAN GOLD MARKET
India is the world's largest consumer of gold. Indians normally buy about 25 per cent of the
world's gold, purchasing around 700 - 750 tons of gold every year.
However, the sharp price increase in 2008 and 2009 has impacted demand with total
demand in 2008 dipping to 660 tones. It is further expected to shrink in 2009 with demand
in first three quarters of 2009 totaling only around 265 tons against 553.5 tons in the same
period of the previous year.
As India's domestic primary production of gold is very less, at around 2-3 tons a year, the
country imports most of its domestic requirement.
Thus, India is also the largest importer of the yellow metal and has averaged imports of
around 600 tons a year. However, 2008 imports dipped to around 400 tons of gold and it is
further expected to dip to around 200-220 tons in 2009 owing to high prices.
India's gold demand is firmly embedded in cultural and religious traditions. It is also
valued in India as a savings and investment vehicle and is the second preferred investment
Indira Institute Of Business Management Page 26
after bank deposits.
Gold hoarding tendency is well engrained in the Indian society and unofficial stocks held
by Indians is estimated to be well above 15,000 tones, which is around 9% of the total
global gold stocks.
Domestic consumption is dictated by monsoon, harvest and marriage season. Indian
jewelers off take is sensitive to price increases and even more so to volatility.
In the cities gold is facing competition from the stock market and a wide range of
consumer goods.
Facilities for refining, assaying, making them into standard bars, coins in India, as
compared to the rest of the world, are insignificant, both qualitatively and quantitatively.
In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to
jewelers and exporters. At present, 13 banks are active in the import of gold. This reduced
the disparity between international and domestic prices of gold from 57 percent during
1986 to 1991 to 8.5 percent in 2001.
Indians have a huge fascination for gold. This is evident in the fact that India is the largest
consumer 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 heights
given the fascination for gold in the country. India consumes about 800 MT of gold which
accounts to about 20% consumption of gold globally. More than 50% of this is used for making
gold jewelry.
Indira Institute Of Business Management Page 27
The domestic India gold market is estimated to be more than US$15 billion and is expected to
rise significantly in the coming years. During April 2008 to February 2009, gems and jewelry
worth US$ 17.79 billion was exported from the country. United Arab Emirates imported more
than 30% of gems and jewelry from India, making it the largest importer from the country. Hong
Kong was the second largest importer with 25% followed by United States with 20%. The gem
and jewelry industry accounts for more than 10% of India's total commodities exports.
.
FEATURES OF INDIAN GOLD MARKET
Though India is the leading consumer of gold in the world, the gold market in India is largely
fragmented and unorganized. Due to the non availability of a benchmark price, the gold prices in
India vary very much from region to region. The festive and the wedding season in the country
witnesses a heavy demand for gold. Despite the global economic recession, the gold
consumption in the country during these times has not abetted.
Indira Institute Of Business Management Page 28
FACTORS AFFECTING INDIAN 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 people
will have, which in turn decides on the amount of gold consumption and other consumptions as
well. Purchasing gold and other precious metals on occasions like Akshaya Tritiya is considered
to be auspicious
3.5) TERMINOLOGIES IN GOLD MARKET
This guide is intended to provide a basic understanding of commodity futures terminology.
Though the terminology of trading agricultural commodities goes far beyond the scope of
this guide, this information can be used to build a knowledge base from which a broader
understanding of the futures market can be developed.
Indira Institute Of Business Management Page 29
ARBITRAGE: The simultaneous purchase and sale of similar commodities in different
markets to take advantage of a perceived price discrepancy.
BASIS: The difference between the current cash price and the futures price of the same
commodity for a given contract month.
BEAR MARKET: A period of declining market prices.
BULL MARKET: A period of rising market prices.
BROKER: A company or individual that executes futures and options orders on behalf of
financial and commercial institutions or the general public.
CALL OPTION: An option that gives the buyer the right, but not the obligation, to
purchase (go “long”) the underlying futures contract at the strike price on or
before the expiration date of the option.
CASH (SPOT) MARKET: A place where people buy and sell the actual (cash)
commodities, that is, a grain elevator, livestock market, or the like.
COMMISSION (BROKERAGE) FEE: A fee charged by a broker for executing a
transaction.
Indira Institute Of Business Management Page 30
CONVERGENCE: A term referring to cash and futures prices tending to come together as
the futures contract nears expiration.
CROSS-HEDGING: Hedging a commodity using a different but related futures contract
when there is no futures contract for the cash commodity being hedged and the cash and
futures markets follow similar price trends. For example, hedging cull cows on the live
cattle futures market.
DAILY TRADING LIMIT: The maximum price change set by the exchange each day for
a contract.
DAY TRADERS: Speculators who take positions in futures or options contracts and
liquidate them before the close of the same trading day.
DELIVERY: The transfer of the cash commodity from the seller of a futures contract to the
buyer of a futures contract.
FORWARD (CASH) CONTRACT: A cash contract in which a seller agrees to deliver a
specific commodity to a buyer at a specific time in the future.
FUNDAMENTAL ANALYSIS: A method of anticipating future price movement using
supply and demand information.
Indira Institute Of Business Management Page 31
FUTURES CONTRACT: A legally binding agreement, made on the trading floor of a
futures exchange, to buy or sell a commodity or financial instrument sometime in
the future. Futures contracts are standardized according to the quality, quantity and delivery
time and location for each commodity. The only variable is price, which is determined on an
exchange trading floor.
HEDGER: An individual or company owning or planning to own a cash commodity —
corn, soybeans, wheat, U.S. Treasury bonds, notes, bills, etc. — and
concerned that the costs of the commodity may change before it can be either bought or sold
in the cash market. A hedger achieves protection against
changing cash prices by purchasing (selling) futures contracts of the same or similar
commodity and later offsetting that position by selling (purchasing)
futures contracts of the same quantity and type as the initial transaction and at the same time
as the cash transaction occurs.
HEDGING: The practice of offsetting the price risk inherent in any cash market position by
taking an equal but opposite position in the futures market. Hedgers use the futures markets
to protect their business from adverse price changes.
INITIAL MARGIN: The amount a futures market participant must deposit into a margin
account at the time an order is placed to buy or sell a futures contract.
Indira Institute Of Business Management Page 32
4)OBJECTIVES
To know the investment pattern and preference of investors
To understand various investment options available.
Indira Institute Of Business Management Page 33
To explore gold as investment.
To explore gold ETF’s.
To determine factors contributing to selection of gold/gold ETF’s for investment .
To compare gold v/s stock as investment options.
To compare gold v/s gold ETF’s.
.
5)RESEARCH METHODOLOGY
It is a descriptive research as this research is conducted on the basis of the secondary data
through various sources and through data available with Sterling Financial Services.
To know the investors preferences and to know about their pattern a data of 300 investors was
taken.
Indira Institute Of Business Management Page 34
SAMPLE SIZE:300 investors
As per the data available with Sterling Financial Services few investors was taken and the
sampling technique used is judgemental sampling.
6)DATA ANALYSIS
As the data is collected from the secondary source the data anlysis is done with the
help of
Table comparision
Comparitive analysis
Graphs
Indira Institute Of Business Management Page 35
Bar diagrams
Pie charts
6.1) GOLD AS AN INVESTMENT OPPURTUNITY
Gold holds its own in any investment evaluation on its strengths as a hedge against inflation,
value in the event of political uncertainties and its traditionally negative co-relation with other
asset classes such as stocks, fixed income securities and commodities.
Indira Institute Of Business Management Page 36
The value of goods and services that gold can buy has remained stable unlike currencies that
have seen significant fluctuation. A study spanning a 400-year period has shown that the basket
of goods and services that gold could buy over the period has remained the same.
Gold protects your portfolio from volatility because the factors, both at the macro-economic and
micro-economic fronts that affect the returns from most asset classes do not significantly
influence the price of gold. Just after 9/11, while stockmarkets and bonds crashed across the
world, gold held steady and, in fact, rose on that day by six per cent.
For a given level of returns from a portfolio, the risk or volatility can be reduced by adding gold
to it. Similarly, crises such as wars, which have a negative impact on prices of most asset classes,
have a positive impact on gold prices since the demand for gold goes up as a safe haven for
parking funds. It is the only medium of exchange completely free of credit risk as it does not
imply a liability for any other entity.
RETURNS EXPECTED FROM GOLD
The 35 per cent return that gold has delivered in the last one year and 170 per cent
absolute return in the last five years is not par for the course. In the period 1970-1982,
gold prices had a compounded annual growth rate (CAGR) of around 21 per cent while
inflation grew by 14.1 per cent over the same period. But in the following 23 years,
inflation grew by 7.6 per cent while gold prices grew by 7.78 per cent.
Over the long term the realistic returns from gold would just beat inflation. Factor in
entry loads (a high 2.5 per cent for UTI-Gold) and annual fund management costs of 1
per cent or more, and the returns are not appealing, though the costs are expected to come
down in the long run.
In the short and medium term investment in gold can be very rewarding considering that
the prices have come off the highs quite a bit and the indicators all point to a revival in
the price rally.
Global demand for gold is 1,000 tonnes more than supply. With no new mining capacity
coming through, most of the gold is being recycled. Inflationary pressures in the world
Indira Institute Of Business Management Page 37
economy are positive drivers of gold prices. The central banks of Russia China and West
Asian countries are giving strong buying support to gold prices.
Gold prices could also go up due to demand from gold ETFs, as they did in the London
Stock Exchange in 2004. Investing in gold requires constant evaluation of international
developments especially of crude oil prices, unfavourable geopolitical developments and
the strength of the US dollar.
Adding gold to a portfolio introduces an entirely different asset class- a tangible & real
asset which increases the portfolio's degree of diversification. Effective portfolio
diversifier
As depicted above, while the overall return of a portfolio without gold is 14%, that of a
portfolio with gold is over 16%. Hence an allocation of physical gold in a financial
Indira Institute Of Business Management Page 38
portfolio not just helps reduce the impact of the volatility created by the other asset
classes like equity, bonds etc., but also increases the average return over a period of time.
A financial portfolio containing gold is generally more robust because it improves the
stability and predictability of better average returns.
Indira Institute Of Business Management Page 39
Gold is the most liquid asset class due to its universal acceptance as an alternative to
currency, and also because globally, the gold market is functional 24x7.
Same cannot be said about any other asset class as they take much longer time to
liquidate (from 1 day to upto 3-4 months)
Effective hedge against currency risk
Due to its inverse relationship to dollar, gold has always proved to be an effective hedge
over a period of time.
Effective hedge against Inflation
Indira Institute Of Business Management Page 40
Source : Bloomberg
Indira Institute Of Business Management Page 41
A study conducted by WGC in UK shows that one ounce of Gold would consistently
purchase the same amount of goods & services as it would have done 400 years ago,
making it the perfect hedge against inflation over a long period of time.
Other Reasons
More liquid as compared to the other asset classes Gold can be bought, sold or traded
globally.
Performance of gold not linked to performance of any company, industry or government.
Gold needs no professional manager unlike mutual funds
Gold is an asset, which is not simultaneously a liability, unlike stocks
It doesn't require political & social stability to survive, in fact it thrives under worst
societal conditions.
Gold doesn't ever loose its intrinsic value.
Indira Institute Of Business Management Page 42
Inspite of the growing demand for gold in India, average retail household has seldom
considered “investing in gold” because of the absence of an efficient and effective
platform.
Indira Institute Of Business Management Page 43
6.2) GOLD ETF’s AS AN INVESTMENT OPPORTUNITY
Gold ETFs are open-ended mutual fund schemes that will invest the money collected
from investors in standard gold bullion (0.995 purity). The investor's holding will be
denoted in units, which will be listed on a stock exchange.
These are passively managed funds and are designed to provide returns that would
closely track the returns from physical gold in the spot market.
An investor can buy and redeem the units either directly from the mutual fund, subject to
certain stipulations, or from the stock exchange.
For example, in Benchmark Mutual Fund's scheme, the units will be allotted in such a
way that the value of each unit will correspond to one gram of gold. This means that if an
investor invests Rs 10,000, when the price of 10 gm of gold is Rs 9,650, he will be
allotted 10.20 units (Rs 10,000 - 1.5 per cent entry load / 965). Each unit will initially
represent one gram of gold though this will come down gradually when gold is sold to
meet fund expenses.
Benchmark Mutual Fund allows its investors to buy and redeem the units after the new
fund offer, either directly from the fund (subject to certain stipulations), or from the stock
exchange.
UTI Mutual Fund's scheme allows investors to redeem units only through authorised
participants, or by selling in the secondary market. The price of the units in the secondary
market will, to a great extent, reflect the price of one gram of gold.
Other funds such as Tata Mutual Fund expect to allot units at face value (Rs 10,000 -
entry load/10). The net asset value (NAV) of these schemes would reflect the value of the
underlying gold. The price of these units in the secondary market would reflect the NAV
and the supply and demand of the units.
Indira Institute Of Business Management Page 44
Benchmark and UTI will appoint market makers (authorised participants) who will buy
and redeem gold units from the fund as well as in the secondary market. This is expected
to keep the price of the units in the secondary market close to the fund's NAV and the
spot price of gold.FV
ADVANTAGES OF GOLD ETF’s
There are enough reasons why gold should be included in any investor's portfolio
whether in physical or paper form. Investing in gold ETFs will give the investor all the
advantages of investing in gold while eliminating drawbacks of physical gold -- cost of
storage, liquidity and purity, among others.
Gold ETFs are transparent investment vehicles that will have to conform to rigid
regulations on investment norms and valuations. This assures the quality of gold that the
fund will invest in and transparency in calculation of NAVs and, consequently, the
market price at which these units will trade.
Gold ETFs allow investment in gold in small denominations, which makes it easier for
the retail investor to participate. On the secondary market, the minimum lot is one unit.
This enables the investor to accumulate units over time and reap the benefits of rupee
cost averaging. The units can be redeemed either from the fund directly or from the
market.
Investing in paper gold gives investors tax advantages over investing in physical gold.
Gold ETF units held for more than one year qualify for long-term capital gains at 20 per
cent, whereas the holding period in physical form has to be three years to qualify for
long-term capital gains. For less than three years, the gains are taxed at 30 per cent. Also,
gold held in paper form is not liable for wealth tax.
Indira Institute Of Business Management Page 45
BENEFITS OF SEQUENCING TAX DEDUCTIONS
There will be no wealth tax or securities transaction tax STT when you sell your GETFs.
There is no STT because this is a non-equity scheme. STT is applicable only when shares
are bought or sold.
The case for wealth tax would have existed if you were in possession of gold in physical
form. The magic of GETFs lies in this. They convert your money into gold which again is
converted into units in demat form.
CALCULATION OF GOLD ETFs
Cost of one unit of GETF = Cost of one gram of gold on the date of allotment.
This is the standard adopted by both the schemes mentioned above.
Assuming that the date of allotment is March 12 and the cost of one gram of GETF then is Rs
1,000.
Ideally you must get 10 units of GETF. However this is not the case.
Most mutual fund schemes impose a kind of tax called 'load' while buying or selling units. The
former is called 'entry load' and the latter is called 'exit load'.
In the entry load of 2.5 per cent for UTI Gold ETF where the minimum investment is Rs 20,000.
Assuming that the price of gold on the day of allotment is Rs 1,000.
In this case, the cost of one unit will be Rs 1,000 plus the entry load of 2.5 per cent. This works
out to Rs 1,025 per unit accounting for the entry load of Rs 25 (2.5 per cent of Rs 1,000).
Hence you will get only 19.5 units (Rs 20,000/Rs 1,025) of UTI Gold ETF instead of 20 units
because of the 2.5 per cent entry load.
For Benchmark Gold BeES, however, the entry load was only 1.5 per cent that is Rs 15 per Rs
1,000. This translates into Rs 1,015 per unit.
Indira Institute Of Business Management Page 46
Rs 20,000 invested in this scheme during the offer then would have fetched you only 19.7 (Rs
20,000/Rs 1,015) units.
Both the schemes do not levy any entry load when these GETFs start trading on the NSE.
If the price of gold on the day of listing plus the brokerage charges (Rs 4 to Rs 6 per Rs 1,000;
yes there are brokerage charges) is less than when you would have bought it during the offer
period plus the entry load.
It will go wrong if the price of one gram of gold is more than Rs 1,025 after listing.
This is not the that gold prices will move only in one direction. They can also drop when the
units are available for trading on the NSE.
INVESTORS IN GOLD ETF – WORLDWIDE
Globally the following class of investors invest in Gold ETF’s
Retail Investors
Bullion traders
Private banks & other Financial Institutions
Market professionals (hedge funds, market makers, stock lenders)
Insurance companies
Pension fund holdings
Indira Institute Of Business Management Page 47
CREATIONS AND REDEMPTIONS
ETFs are different from Mutual funds in the sense that ETF units are not sold to the public
for cash. Instead, the Asset Management Company that sponsors the ETF (Fund) takes the
shares of companies comprising the index from various categories of investors like
authorized participants large investors and institutions. In turn, it issues them a large block of
ETF units. Since dividend may have accumulated for the stocks at any point in time, a cash
component to that extent is also taken from such investors. In other words, a large block of
ETF units called a "Creation Unit" is exchanged for a "Portfolio Deposit" of stocks and "Cash
Component". The number of outstanding ETF units is not limited, as with traditional mutual
funds. It may increase if investors deposit shares to create ETF units; or it may reduce on a
day if some ETF holders redeem their ETF units for the underlying shares. These
transactions are conducted by sending creation / redemption instructions to the Fund. The
Portfolio Deposit closely approximates the proportion of the stocks in the index together with
a specified amount of Cash Component. This in-kind creation / redemption facility ensures
that ETFs trade close to their fair value at any given time.
Some investors may prefer to hold the creation units in their portfolios. While others
may break-up the creation units and sell on the exchanges, where individual investors
may purchase them just like any other shares. ETF units are continuously created and
redeemed based on investor demand. Investors may use ETFs for investment, trading or
arbitrage. The price of the ETF tracks the value of the underlying index. This provides an
opportunity to investors to compare the value of underlying index against the price of the
ETF units prevailing on the Exchange. If the value of the underlying index is higher than the
price of the ETF,
The investors may redeem the units to the Sponsor in exchange for the higher priced
securities. Conversely, if the price of the underlying securities is lower than the ETF, the
Indira Institute Of Business Management Page 48
investors may create ETF units by depositing the lower-priced securities. This arbitrage
mechanism eliminates the problem associated with closed-end mutual funds viz. the
premium or discount to the NAV.
Indira Institute Of Business Management Page 49
6.3) COMPARISON OF GOLD ETF WITH PHYSICAL GOLD
Parameter Jewelers Bank Gold ETF
How gold is
held
Physical
(Bars / Coins)
Physical
(BarsCoins)
Dematerialized
(ElectronicForm)Pricing Differs from one to
another. Neither
transparent nor
standard.
Differs from bank
to bank. Not
Standard.
Linked to International Gold
Prices and very transparent.
Buying Premium
above gold price
Likely to be more Likely to be more Likely to be less
Making
Charges
Charges are
incurred
Charges are
Incurred
No Charges are incurred
Impurity Risk High Nil Nil
Storage
Requirement
Locker / Safe Locker / Safe Demat Account
Security of
Asset
Investor is
responsible
Investor is
responsible
Fund House takes the
responsibilityResale Conditional and
uneconomical
Banks do not buy
back
At Secondary Market Prices
Convenience in
Buying / Selling
Less convenient, as
Gold needs to be
moved physically
Less convenient,
as Gold needs to
be moved
physically
More Convenient, as held in
electronic form under the demat
account
Quantity to
Buy / Sell
Available in
standard
denomination
Available in
standard
denomination
Minimum is ½ or 1 gram
according to the fund
Bid Ask
Spread
Very High Can’t Sell Back Very Low
Risk of Theft Yes, possible Yes, possible No, Not possible
Wealth Tax Yes Yes No
Indira Institute Of Business Management Page 50
TAX IMPLICATIONS
Sr
No
Parameter Local Branded
Jweler
Bank Gold Etf
1 Wealth Tax Applicable Applicable Applicable Not Applicable
2 Short Term
Capital Gain
Tax
Applicable
Before 3 Years
Applicable
Before 3 Years
Applicable
Before 3 Years
Applicable
Before1year
3 Long Term
Capital Gain
Tax
Applicable
After 3 Years
Applicable
After 3 Years
Applicable
After 3 Years
Applicable After
1 Year
Long Term Capital Gain Tax
• Long Term gains tax of 10% or 20% with indexation will be applicable
Short Term Capital Gain Tax
• The tax bracket under which the investor is applicable
Securities Transaction Tax
• No STT will be applicable on units traded on the exchange
Indira Institute Of Business Management Page 51
Indira Institute Of Business Management Page 52
Source:Bloomberg
6.4 )GOLD V/S STOCK
•Performance of gold not linked to performance of any company, industry or government.
•Gold needs no professional manager unlike mutual funds.
•Gold is an asset, which is not simultaneously a liability, unlike stocks.
•It does not require political & social stability to survive, in fact it thrives in the worst conditions.
•Gold will never loose its intrinsic value.
Market Moving Factors
Indian gold prices are highly correlated with international prices. However, the fluctuations in
the INR-US Dollar impact domestic gold prices and have to be closely followed.
The global prices are driven by a host of factors with macro-economic factors like strength of
the economy, rising importance of emerging markets, currency movements, interest rates
being major influencing factors.
Supply-demand is a major influencer, amid rising global investor demand and almost stable
supplies.
Shifts in official gold reserves, reports of sales/purchases by central banks act as major price
influencing factors, whenever such reports surface.
The investment in gold is influenced by comparative returns from other markets like stock
markets, real estate other commodities like crude oil.
Domestically, demand and consequently prices to some extent are influenced by seasonal factors
like marriages. The rural demand is influenced by monsoon, agricultural output and health of the
rural economy
Indira Institute Of Business Management Page 53
GOLD : HEDGE AGAINST INFLATION
CA GR Returns Gold Inf lation
1 Y ear 14.93% 6.58%
2 Y ear 24.95% 5.30%
3 Y ear 16.56% 5.25%
5 year 16.04% 5.34%
10 years 8.84% 4.95%
Rs. 100 invested on 31/1/1997 in Gold would have become Rs. 233.33 as on 31/1/07 The Goods
and Services would cost Rs 162.11
Indira Institute Of Business Management Page 54
6.5) INVESTOR PATTERN AND PREFERENCE
1) No people invested in different investment options
INVESTMENT OPTIONS NO OF PEOPLE
EQUITY 207
MUTUAL FUNDS(MF) 180
GOLD 60
GOLD ETF’s(GETF’s) 40
EQUITY MF GOLD GETF's0
50
100
150
200
250
INVESTORS
Interpretation:Most of the investors prefer equity for investments as the return is much
higher and the amount one can invest is also small.
Indira Institute Of Business Management Page 55
2)Which one is preferred amongst gold and gold ETF’s?
Preference for Gold ETF 40
Preference for physical gold 60
As per preference
GOLDGOLD ETFs
Interpretation :Investors prefer investment in gold rather than investment in gold ETFs as
the awareness for gold ETFs is still low in India.
Indira Institute Of Business Management Page 56
3)Which gold ETF is the most preferred by investors?
SR
NO
LIST OF ETFs NO OF INVESTORS
1 KOTAKGOLD 7
2 GOLDSHARE 8
3 GOLDBEES 17
4 RELGOLD 5
5 QGOLDHALF 2
6 SBI GETS 1
KOTAKGOLD
GOLDSHARE
GOLDBEES
RELGOLD
QGOLDHALF
SBI GETS
0 2 4 6 8 10 12 14 16 18
INVESTORS
Indira Institute Of Business Management Page 57
Interpretation : Goldbses is preferred by investors to invest in gold ETFs because it is the
oldest and it has provided higher returns over a long period of time.
4)People who had invested only in one investment option?
SR
NO
INVESTMENT OPTION NO OF PEOPLE
1 EQUITY 67
2 GOLD 20
3 MUTUAL FUND(MF) 50
EQUITY MF GOLD0
10
20
30
40
50
60
70
80
Series 1
Interpretation: There are few investors i.e 137 investors who don’t have a diversified portfolio.
Indira Institute Of Business Management Page 58
7)CONCLUSIONS
Internationally trading in Gold has given the investors very safe and very fruitful option.
Today people who earlier feared from entering the market are investing in Gold as it is
the most safest asset and also its price is less fluctuating.
Gold Market has developed vastly since it was started. Recently gold prices touched the
height of Rs.19000/- per 10gm which astonished everybody.
The reason may be any but today people willing to invest in Gold rather than Stock.
Adding gold to your portfolio gives higher returns.
Gold ETFs are another option which investors can look forward for.
In last 10 years prices of gold have been increased.
Gold has significantly low correlation to other assets like equity indices, fixed income and
commodities. Therefore adding gold to a portfolio may help improve risk adjusted returns or
reduce volatility for the expected return.
Indira Institute Of Business Management Page 59
There is need for an instrument which has,small denomination ,cost
efficiency ,convenience for long term holding ,greater uniform
availability ,transparency,liquidity, tax Efficiency
Gold ETF’s Can fulfill this Need
IMPROVING STABILITY AND PREDICTABILITY OF RETURNS
Gold improves the stability and predictability of portfolio returns. It is not correlated
with other assets because the gold price is not necessarily driven by the same factors that
drive the performance of other assets
Adding gold to a portfolio introduces an entirely different class of asset. Gold is unusual
because it is both a commodity and a monetary asset
Gold is one of the few financial assets that is not linked to a liability. It can provide
'insurance' against extreme movements on the value of traditional asset classes.
Indira Institute Of Business Management Page 60
8)BIBLOGRAPHY
www.google.com
www.mcx.com
www.nseindia.com
www.bseindia.com
www.netdania.com
www.dailyfx.com
Article Source: http://EzineArticles.com/?expert=Manish_Choudhary
Indira Institute Of Business Management Page 61