GOLD : SHINING DAWN

DESCRIPTION

• Known since pre historic period.

• Egyptians began mining gold.

• Minting of gold coin began around 640 BC.

• 1st pure gold coin minted in reign of king croesus who ruled from 561-547 BC.

USES • Jewellery.

• Coinage & used for standard monetary system.

• Electrical wires.

• Inside computer chips.

• Used by dentists.

• Used as industrial catalysts.

GOLD DEMAND

•All over the world, gold has emotional, cultural and financial value, which supports demand across generations.

•This self-balancing nature of the gold market means that, typically, there is a sustained base level of demand. 

JEWELLERY & INVESTMENTS• Jewellery has always been a dominant area of demand

for gold. Prized for its value as well as its beauty, gold jewellery has a universal status that remains constant

• India and China are the two largest markets for gold jewellery, together representing over half of global consumer demand in 2014

• Gold has unique qualities that enhance risk management and capital preservation for institutional and private investors across the globe

• Today, investment in gold accounts for around one third of global demand.

CENTRAL BANKS & TECHNOLOGY• Central banks’ behaviour with respect to gold has

fundamentally shifted over the past few years• Some banks have bought gold to diversify their portfolios,

especially from US$-denominated assets, with which gold has a strong negative correlation

• In the investment sector, the World Gold Council aims at stimulating and sustaining the demand for gold as an investment

• For more than 30 years, the World Gold Council has partnered with Tanaka Kikinzoku Kogyo K.K. – the largest bullion house in Japan – to promote gold coins and so-called Gold

Rank Continent Country or region Gold production (metric tons) in 2014

World World (rounded) 2,990

1 Asia china 450

2 Aus-Oceania Australia 274

3 Europe Russia 247

4 Americas United States 210

5 Americas Canada 152

6 Africa South Africa 152

7 Americas Peru 140

8 Americas Mexico 118

9 Asia Uzbekistan 100

10 Africa Ghana 91

Rest of World Rest of the world 858

DOMINATING COUNTRIES IN GOLD

IMPORT OF GOLD IN INDIA•India imports in excess of 1000 tons annually (including unofficially smuggled gold) with negligible local production.•Gold imports cost is nearly 3% of the GDP. Alarmed by the huge trade deficit in the year 2012.•. Imposing customs tax on gold imports in India or devaluation of Indian currency, led to the softening of its international price but remained range bound in rupee terms.•The gold imports are also serving to channelise undeclared earnings by exporters and importers of India.•It is estimated that unnecessary gold imports are retarding growth of Indian economy by at least 3% points.•India is the second largest importer of swiss gold.•Industry sources say that the quantum of gold imports from Switzerland has increased to around 60% in 2013 and 2014 from an average 45-50% in the decade through 2012.

EXPORT OF GOLD FROM INDIA

• An important emerging sector of Indian economy, gem and jewelry is a leading foreign exchange earner for the country.

• The country consumes around 800 tonnes of gold that account for 20 % of global gold consumption and nearly 600 tonnes of this goes into jewelry making.

• Indian jewelry sector is well supported by Government policies and the banking sector, with around 50 banks providing about US$ 3 billion credit to the Indian diamond industry. In addition, the country is expected to have a diamond bourse soon.

• It also contributes over 15 % of the total exports of country and provides employment to 1.3 million people directly and indirectly.

• Future growth in the gem and jewelery business is likely to be driven by increased exports to the US and other markets, apart from a surge in domestic consumption.

PRICE FLUCTUATIONS

FUNDAMENTAL FACTORS AFFECTING GOLD

• Global crisis• Inflation• Value of the U.S dollar• Central Bank Instability• Interest rates• Supply VS demand

EFFECTS OF DERIVATIVE INSTRUMENTS ON GOLD

• Gold Options Exchange

• Call and Put Options

GOLD OPTIONS VS GOLD FUTURES

• Additional leverages

• Limit potential losses

• Flexibility

• Time decay