REFERENCES

Index

PartTopicPage No.

a.Industry Profile7

b.Company Profile10

c.Theoretical aspects of concept23

d.Research Methodology28

Objective of study and Benefits of the study.28

Research design, Sample Design, Data collection tools, etc.29

Limitations of study31

Detail Study32

e.Analysis of data93

f.Findings103

g.Conclusions105

h.Recommendations107

i.Annexure108

j.Glossary of terms114

k.Bibliography115

Industry ProfileIt is financial advisory Industry specializing in risk management, hedge funds and derivatives, commodity, managing the portfolio.

It provides institutional investors, Retail investors, funds of funds, hedge fund managers, mutual funds, traditional money managers, banks/investment banks, and law firms with consulting services including:

Policy, procedures and guideline creation or review

Market, credit, operational and legal risk diagnosis

Legal Outsourcing

Legal Risk Management

New product development

Structuring and analysis of transactions

Portfolio construction

Reviews of practices vs. best practices

Litigation support/financial forensics

Corporate/Risk Governance

Compliance Reviews

Regulatory Advice

Risk Partnership

Portfolio diagnostics

Risk benchmarking

NAV/Mark to market verification

Portfolio construction

Risk budgeting

Risk Branding

Transitioning from asset to risk allocation

Creating your integrated, risk-adjusted efficient frontier

Portfolio optimization

Establishing hedge funds and funds of funds

Designing and Implementing Compliance Programs

Providing Regulatory Updates

Customized Fund of Funds

Research and advisoryRisk Management Experience In depth understanding of complex instruments and strategies.

Strong quantitative skills.

Experienced in new business development.

Experienced with establishing standards for transparency and disclosure.

Designed risk management infrastructure for large, institutional asset management group, including performance and risk reports.

Experienced with valuation issues across broad array of illiquid instruments.

Experienced with identifying and resolving problematic situations, including but not limited to, valuation issues, risk issues, trader issues, and operational issues.

Extensive Market, Credit and Operational Risk Management experience, including hedge funds, traditional asset management, trading desks and prime broker operations.

Extensive hedge fund and fund of funds due diligence experience.

Extensive experience teaching funds of funds and institutional investors how to de effective due diligence.

Skilled at interviewing and selecting traders and trading managers.

Experienced at firing traders.

Extensive network of contacts in the trading world provides unique access to the real story on reputations - we create our own references.

Ran repo, stock loan, prime broker, swaps businesses and options businesses.

Experience with liquidity management.Legal Experience Litigation and expert testimony for a variety of complex securities and derivatives cases.

Advisor to many U.S. and foreign banks, broker dealers, investment advisors and funds.

Experienced in setting up funds.

Extensive SEC, bank regulatory and CFTC experience.

Experienced in new product development.

Experienced in all aspects of compliance.

Company ProfileMotilal Oswal Securities Ltd.( MOSt) History & MilestonesThe story of MOSt goes back many years, when Mr. Motilal Oswal and Mr. Raamdeo Agrawal met each other as students in a Mumbai suburban hostel in the early eighties. Both the young chartered accountants hailing from a rural & an unpretentious background had a common dream viz 'to build a professional organization with strong value systems, to provide reliable & honest investment advice to investors'. Thus was born their first enterprise called "Prudential Portfolio Services" in 1987.2006

Places 9.29% with two leading private equity investors - New Vernon Private Equity Limited and Bessemer Venture PartnersAcquires a leading south Indian brokerage firm - Peninsula Capital MarketsEnters Private Equity and plans entry into Investment Banking businessesValue PMS gives 390% returns to its investors between Feb 2003 and March 2006First advice-based online trading proposition in the Indian marketsAnother milestone in distribution - 1019 outlets, 375 cities, serving 1.61 lakh clientsHas a 1400 member team working to achieve the company's vision

2005

Asiamoney Brokers Poll 2005 rates Motilal Oswal Securities - Best Local Brokerage, Most Independent Research House, Best in Sales and ServiceLaunches two new Portfolio Management Schemes - Value Hedging for derivatives and Discover Value for the Rs5 lakh to Rs50 lakh categoryAcquires local brokerage Gayatri Capitals from Andhra Pradesh and Varghese from BangaloreDeepest distribution in the stock broking segment with 700 outlets in 320 cities and 1.2 lakh clients

2004 Presence expanded to 270 outlets in 150 cities and 20 states Value PMS delivers a whopping 160% post tax returns for the period ended April 2004 Bulls Eye PMS - A momentum based PMS launched Start of the Solid Research Solid Advice campaign

2003 MOSt Portfolio Management Services launched with Mr. Raamdeo Agrawal as the Portfolio Manager. Uniquely structured performance related fees. Inquire team is successful in capturing the uptrend in Banking, Auto and Infrastructure sectors. 15,000 Depository clients acquired. 9 own branches setup at 7 cities to provide Equity Advisory Services. More in the pipeline. 150 outlets in 110 cities across 18 states & one Union Territory in India manned by 1000 people servicing over 15,000 Retail and Institutional Investors.

2002 Mr. Navin Agarwal, Head of Equity Research & Institutional sales, is inducted in the Board of Directors MOSt consolidates its retail operations & upgrades its IT / Back Office infrastructure to cater to its growing network of branches, Franchisees and Channel Partners. Retail network completes coverage of 100 cities in India. Direct servicing of HNI clients is initiated. 10,000 Depository clients acquired.

2001 Legendary marketing guru Shunu Sens services taken to revitalise retail marketing strategy and branding efforts. Starts offering Derivatives products and advisory services on both BSE as well as NSE

2000 Both Mr. Motilal Oswal and Mr. Raamdeo Agrawal receive Rashtriya Samman Patra from Central Board of Direct Taxes for being amongst the top 50 tax payers in India from FY94-FY98 Acquires its 100th Franchisee / Channel Partner and emerges as a leading player in the Indian Broking Sector Becomes a Depository Participant of Central Depository Services Limited (CDSIL)

1999 Mr. Raamdeo Agrawal starts attending legendary billionaire investor Warren Buffetts Annual General Meetings of Berkshire Hathway Inc. He still continues to attend it every year. The Wealth Creation Study started in 1996 culminates into Wealth Creation Seminar and Awards function in 1998. First Stock Broking house to brand its services as a research and advise based broker. www.MotilalOswal.com launched. First broking house in India to go on the web. Becomes a Depository Participant of National Securities Depository Limited (NSDL). Inducts Mr. Ivan Mathias, former country head of Watson Wyatt Worldwide, on its Board to Directors to shape HR initiatives.

1998 Mr. Motilal Oswal joins the Governing Board of The Stock Exchange, Mumbai.

1996 Wealth Creation Study started. First of its kind study initiated to identify biggest and fastest wealth creating companies in Indian Stock markets.

1995 Motilal Oswal gets incorporated as Motilal Oswal Securities Ltd.

1994 MOSt acquires NSE Membership and plans for major expansion of its retail network.

Inquire (Indian Equity Research) is formally created at a 2500 sq. ft office in South Mumbai with bigger and better quality infrastructure than the corporate office. Since then nearly 20% of revenue is allocated to research. First Domestic Stock broking house to have such a strong Research focus

Motilal Oswal enters Institutional Broking business.

1990 After just three years in the business, Motilal Oswal is formed through acquisition of membership on The Bombay Stock Exchange (BSE). Three more memberships taken in later years.

1987 Mr. Motilal Oswal and Mr. Raamdeo Agrawal lay the foundation of a great partnership by starting a sub-broking firm. The venture stands out from the rest due to their approach of Research-based broking even when sub-brokers.

Motilal Oswal Securities is a leading research and advisory based stock broking house of India, with a dominant position in both institutional and retail broking. Asiamoney Brokers Poll 2005 has ranked us the best Indian brokerage firm. There are various other categories where we have been rated number one most independent research, sales and service etc by the Brokers Poll.

In March 2006, AQ Research, a firm that analyses the accuracy of a brokers research call, declared Motilal Oswal Securities the best research house for Indian stocks.

Motilal Oswal Securities has witnessed rapid organic growth due to favorable market conditions as well as efforts put in by the company itself. FY05 and FY06 saw the company grow inorganically through acquisition of three significant regional broking firms from Andhra Pradesh, Karnataka and Kerala. Over a period of time many more regional broking firms may be acquired to gain solid footing in various regions of India.

The company was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices, respect for professionalism, research-based value investing and implementation of cutting-edge technology have enabled us to blossom into an almost two thousand-member team.

Our institutional business unit has relationships with several leading foreign institutional investors (FIIs) in the US, UK, Hong Kong and Singapore. In a recent media report we were rated as one of the top-10 brokers in terms of business transacted for FIIs.

The retail business unit provides equity investment solutions to more than 150,000 investors through 900 outlets spanning 340 cities and 24 states. We provide advice-based broking (equities and derivatives), portfolio management services (PMS), e-Broking, depository services, commodities trading, IPO and mutual fund investment advisory services. Its Value PMS Scheme gave a 402.74% return since inception ( Feb 2003) , ( Sensex is 270.69% & Nifty is 245.11%). The perfomance of Value Hedging since inception ( Oct 2005) is 32.76%.

Such an outstanding performance can be only attributed to our single-minded focus on research-based value investing. Motilal Oswal Securities invests almost 5-10% of its revenue on equity research and hires and trains the best resources to become advisors to its valued clients.

Our unique Wealth Creation Study, authored by Mr Raamdeo Agrawal, Managing Director, is now in its eleventh year. Investors keenly await this annual study for the wealth of information it has on how companies created wealth during the preceding five years.

The organization finds its strength in its team of young, talented and confident individuals. Qualified professionals carry out different functions under the able leadership of its promoters, Mr.MotilalOswal and Mr.RaamdeoAgrawal. Stringent employee selection process, focus on continuous training and adoption of best management practices drive the quest to achieving our Vision.

MOSt Vision

MOSt Guiding Principles & Core Values

Customer interest is paramount

Ethical and transparent business practices

Respect for professionals,associates and business partners

Research based value investing Cutting edge technology to ensure world-class customer servicePeople behind the organizationMr. Motilal OswalChairman and Managing DirectorMr. Motilal Oswal is the promoter of Motilal Oswal Securities Ltd. He is an member of Institute of Chartered Accountants of India and started the business along with the co-promoter Mr. Raamdeo Agarwal in 1987.Business Administration is his forte, Honesty, transparency and client goodwill form the core of his business practice.

Service is required in everything, in research, in execution and in settlement. It is going to be the key to survival. If you give good service and value to your clients, it will translate into good business. This has been a strong belief of Mr. Motilal Oswal and he has not only practiced it himself but also made efforts to inculcate similar values in the employees of the organization. He had been elected as a Director of BSE and joined its governing board in 1998. He is currently a member of various committees of CDSIL and SEBI.

Mr. Raamdeo AgrawalJoint Managing DirectorMr. Raamdeo Agrawal is the co-promoter of Motilal Oswal Securities Ltd. A member of the Institute of Chartered Accountants of India & an equity research stalwart, he is the man behind the strong research capability at MOSt.He is respected by all in the research and broking industry for his valuable insights on issues related to equity research. His firm belief in Value-Investing, as practiced by the legendary Warren Buffett and Charlie Munger, forms the core of MOSt investment philosophy.

Management TeamMOSt management team is regularly engaged in finding ways to improve operational efficiencies and customer satisfaction. You will find CAs, CFAs, ICWAs, CSs, MBAs and IT professionals managing crucial functions, to bring you best products and services - from research & advice to trade execution & settlement. At MOSt we practice meritocracy and each of the team members is provided extensive training.Training & Manpower DevelopmentMOSt conducts various training and development programs regularly to enhance the capabilities of its team. As much as 5% of the salary bill is spent on such programs, which is amongst the highest for a broking organization in India. MOSt is truly a learning organization with lead being taken by the Directors, who regularly participate in top management learning programs like Strategic Management Program at Indian School of Business, Hyderabad, Strategy Summits with Management Gurus like Tom Peters and Dr. Lester Thurow, Dean, Sloan School of Management, (MIT) and Brand Management Seminar by Al Ries etc.Motilal Oswal Commodities Broker Pvt. Ltd MOSt is one of the leading equity research & broking houses of India (Best Local Brokerage House-India By Asia Money Poll-2005). MOSt provides end-to-end equity solutions to institutional & individual investors. MOSt provides products & services such as e-broking, derivatives, depository service, portfolio management & equity research. Recently, Motilal Oswal Group has floated Motilal Commodities Brokers (P) ltd to provide commodity trading facilities & related products and services.Global Investment Assets

Equities

Commodities

Real Estate

Bonds

Value Added Services

Daily view Commodity wise compared to International markets.

Fundamental and technical report are uploaded Daily on our site. Advisory given on basis of daily reports.

Technology Support as in Equity.

Similar Front end and BO as of equity.

Stable Systems for Payin/Payout.

Client Security Strong Compliance.

F Focused in New Avenue and is committed to serious Business

E Experience in Settling pressure of 1.5 lakh trades per day in Equity

A Recognised Brand Name for equity Advisory.

R Tested Risk Management Systems.

Motilal Oswal Commodities Broker Pvt. Ltd.(MOCB) a fully owned subsidiary of Motilal Oswal Securities Ltd. (MOSL), Clearing Member and Trading Member with NCDEX .

Initiated the trading operation in 2004

Presence in all the four zones. Commodity exchanges have collectively clocked a turnover of Rs 92,226 crore in April, lower than Rs 98,000 crore in March. According to data provided by the Forward Markets Commission (FMC), only two exchanges have posted nearly 90% of the total April turnover. Daily Volume on National Level Online Commodity Exchange reached 12500 Cr. Approx.

NCDEX MCX NMCE

Benefits of Commodities in Balanced Portfolio Low correlation with other Asset Class

Positive correlation with Inflation

Cash Return

Unexpected Events

Business Cycle

By Nature a global productManagement Integrity

Widely respected in the Indian Stock Broking fraternity for its high standards of corporate governance and adherence to ethical business practices

SANMAN PATRA awarded by the Government of India to both the promoters for being amongst the top 50 income tax payers in the country for the period 1994-96

Research

Popularly known as Inquire, companys research is highly respected by FIIs, MFs, FIs and Retail clients

Rated by Asiamoney Brokers Poll as among the best domestic research brokers

Sectors covered in depth include :- Automobiles,Banking,Cement,Engineering,IT, Media,Metals ,Oil & Gas,Pharmaceuticals & UtilitiesProduct Range

Equity Broking

Portfolio Management Services

Depository Services

Derivatives

Commodities

Internet BrokingIndian Market

Bullion (only GOLD)

Large consumer (Rs 400 bn) -traditional form of investment

Large stocks of unaccounted metal (approx.13000t)

Skill in hand made jewelry

Market Participants

Hedgers, Speculators, Investors, Arbitragers, (same as Equity markets) Producers Farmers Consumers refiners, food processing companies, jewelers, textile mills, exporters & importers Institutional proprietary trades currently disallowedFUTURES TRADING IN COMMODITIES India has a long history of presence of commodity trading.

Worldwide commodities markets are bigger than equity markets in size as well as penetration.

Commodities markets are useful for producers, manufacturers & traders to hedge their risk of price movement.

Like equity market, Speculation provides the much needed liquidity & depth.

Futures market help in Price Discovery of commodities under transparent organized & institutional market set up.

HOW TO TAKE PART IN COMMODITY MARKET!

Hedging for manufacturers & users.

Arbitrage between different months & with spot market & International markets.

Speculation based on technical & fundamental view.

Some Thoughts

Plan your investment and play your plan

Research before you invest and not after

Theoretical aspects of conceptWhat is commodity?Commodity includes all kinds of goods. FCRA defines "goods" as "every kind of movable property other than actionable claims, money and securities". Futures' trading is organized in such goods or commodities as are permitted by the Central Government. At present, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for futures trading under the auspices of the commodity exchanges recognized under the FCRA. The national commodity exchanges have been recognized by the Central Government for organizing trading in all permissible commodities which include precious (gold & silver) and nonferrous metals; cereals and pulses; ginned and unginned cotton; oilseeds, oils and oilcakes; raw jute and jute goods; sugar and guar; potatoes and onions; coffee and tea; rubber and spices, energy etc.Trend Analysis is the examination and evaluation of the relevant information to select the best course of action from among various alternatives.Purpose:

Main purpose of this analysis is to aware with the historical scenario of the domestic and International Bullion Commodity Market. And Using this Information can be able to Predict the Future price, Demand, Supply of the Bullion Commodity in the World.

It also consist History of Gold and Silver, Fundamental of Gold and Silver, Historical Prices of Gold and Silver in Domestic as well as in International Market which can help to predict the future trend of the market.

Features of Indian Gold Economy, Properties, Uses and Characteristics of Gold and Silver also help to aware with the bullion commodity. Gold and Silver Production all Over the World

World Gold and Silver Demand and Supply

Mine Production by Countries

Gold and Silver Jewellery Demand in the World

Official Gold Reserve in the World

World Gold Holding

Gold Mining Production Process

Top 20 Silver Producing Country

All Above Information helping to know the historical trend of the Bullion commodity Market all over the world. And It helps to Investor to predict the future trend of the Bullion Commodity Market. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future.There are three main types of trends: short-, intermediate- and long-term.Trend analysis tries to predict a trend like a bull market run and ride that trend until data suggestsa trend reversal (e.g. bull to bear market).Trend analysis is helpful because moving with trends, and not against them, will lead to profit for an investor.

Outsourcing Trend Analysis to India

Get the competitive advantage with Trend Analysis. Get significant insights into customers and markets to guide your company's marketing, investment, and administration objectives. "With the past, we can see trajectories into the future - both catastrophic and creative projections. John Ralston Saul. Importance of ConceptData analysis including Trend Analysis is essential for a firm's competitive intelligence program. The ability to accurately gauge customer response to changes in business and other environmental parameters is a powerful competitive advantage. Trend Analysis is essential to running an organization's value chains and in acquiring and consolidating corporate success. It allows business users to make analytical decisions about those business processes that maximize revenue from core customers.

With the information explosion, an incredible amount of information is available to organizations. However, raw data by itself does not provide much information. It is the conversion of this raw data into significant facts, relationships, trends and patterns, that could otherwise go unobserved.

This makes Trend Analysis an essential part of running an organization's value chains and in acquiring and consolidating corporate success. It allows business users to make analytical decisions about what direction the business should target its resources on and to focus on those business processes that maximize revenue from core customers.

Trend Analysis Proper - Allows you to plot aggregated response data over time. This is especially valuable, if you are conducting a long running survey and would like to measure differences in perception and responses over time. Thus Trend Analysis provides an insight into the following:

Changes and trends in customer needs and behavior, and shifts in the customers' perception of value.

Trend in price change and cost drivers for the industry and/or specific segments

Change and evolution of the industry in terms of new entrants, and competition, threat of substitutes and relationship with buyers and suppliers

Upcoming business models and changing best practices of the industry and related emerging sectors

In depth analysis of long term industry, domestic and global economic cycles and trends. What are the benefits of Trend Analysis? 1. Detailed Trend Analysis - to predict the threat of new entrants and allows management to develop competitive strategies thus enabling industry position as well as pursuit of leadership.

2. It provides security of strategic investments and protection of assets.

3. Enables crucial decisions on mergers and acquisitions as well as the ability to develop alliances and partner relationships.

4. Trend Analysis data can be further used for various cost/benefit analyses. And can be extremely valuable as an early warning indicator of probable issues with product line and service level changes.

5. Trend Analysis enables a business to view strategies from a long-term perspective with respect to effective asset and investment deployment and can safeguard against costly errors in relationship management and strategic positioning. The advantages of Trend Analysis The ability to accurately gauge customer response to changes in business and other environmental parameters is a powerful competitive advantage. Furthermore O2I's trend analysis includes the process of studying data to gain insights into long-term trends such as failure patterns that can be applied to incident and problem management as well as capacity management. Internal and external users can apply Trend Analysis to determine weaknesses and strengths. This will enable internal users to enhance administration efficiency of the company when necessary and external users to form valuation models of the company based on how well the company is managed. What if you could make your investment decision at the very first idication that a trend is beginning, before most everyone else? Here are 10 ideas to consider when investing. Risk Diversify Information moves the markets You can count on human behaviour Look everywhere Timing is everything. When does the news begin to have an impact on sector prices? All sectors are not created equal. Trend Pointers monitors the most intriguing sectors and those that are just emerging If you only could know one thing You need a trend partner. You cannot rely just on the financial experts- they are often wrong . I adapted my professional marketing andbehavioural research expertise to a more personal need- effectiveinvesting advice The EvidenceResearch MethodologyResearch ObjectivesIn general sense research means search and analyse the knowledge, as a scientific and systematic search for pertinent information on the related topic.

The research objective addresses the purpose of the investigation. It will give us the exact information about what is being planned. Research objective as under.The following points reflect the core of the objectives and the essence, which also directly focuses on the coverage of the project work undertaken.

The first and the most important object are to be comparing the theoretical work with practical scenario. To study various aspect of trend Analysis and its implementation on investors decision, for his investment decision as well as knowledge purpose of the Market. To know about the Bullion commodity Sector i.e. factor affecting the sector and how to provide valuation to the Bullion commodity of the sector for the investment to earn max profit. Develop a creative and innovative attitude and if possible come out with some new suggestions and recommendation for the organisation.Data Collection

In research methodology, data collection is mainly two types; Primary data collection and Secondary data collection. Various fruitful discussions have been made with the brokers to collect the financial information of the company as well as for understanding of the sector. Data collection as under:

Primary Data Collection:

Primary data collection is those, which are collected fresh, and for the first time happen to the original in character.

Here, I had Collected data from the one of the area survey using the questionnaire with employees of the Motilal Oswal Securities Ltd., brokers, and the individual investors in the Market.

Topic: A survey Report on Factors Influencing The Investment PatternSamples are randomly taken from the Market.

Sample Size : 50 sample.

Secondary Data Collection:

Secondary data means are those which have already been collected by someone else and which have already been passed through the statistical process.

Here, I had collected all the data related to Bullion commodity from the different web sites. Which are as under.For gold

www.google.com

http://www.gold.org/links/index.php

www.gfms.co.uk

www.lbma.org.uk

www.nymex.com

www.tocom.com.jp

www.gold.org

www.kitco.com

www.dmcc.ae

www.iab.gov.tr

www.usagold.com

www.thebulliondesk.com

www.goldprice.com

www.mcx.com

www.ncdex.com

www.thebulliondesk.com

www.moneycontrol.com

www.advfn.com

www.bambooweb.com

www.personalfn.com

For silver

www.google.com

www.silverinstitute.uk

www.lbma.org.uk

www.nymex.com

www.tocom.com.jp

www.gfms.co.uk

www.kitco.com

www.mcx.com

www.ncdex.com

www.silverprice.com

Benefits of the Study

During the training in Motilal Oswal Securities Ltd., which is a broking firm, and the topic is the Trend Analysis on Bullion Commodity Market As this is totally new area of study. Benefit of the study as under:

With the help of trend analysis of Bullion commodity and world market, the present situation of the bullion commodity market and future prospects can be known.

The project helps for get practical exposure to the Market.

The project helps in getting knowledge of Bullion Commodity market, i.e. the factors that affects the performance of the Market, Trend in the market, how international market affects the domestic market in bullion commodity.

By survey discussion of the different investors, brokers & experts of the market, to know about investment pattern they use while investing and factors keep in mind while investing.

Limitation of the Study

Coin has two sides, same as every matter has advantages and disadvantages, though put all the full efforts for the completion of the project, there are some limitations are as under:

The first and the most important limitation is that, do not have practical experience and knowledge and about the topic. This report help just as theoretically get the knowledge. Here, statistical data collected are used for this time only because there is always market is volatile so there may be different scenario in the market after some years. And the other limitation is that the figures for projected analysis are based on the assumption because no one can able to predict the real situation of the market.

In spite of full efforts made the findings of the analysis that whether to buy or sell or hold the commodity may not be 100% accurate.

In this project, while determining the efficiency of the market only trend analysis is taken, where as other approach like technical analysis, economical analysis also exist which affects the price of the commodity.

Benefits of Exchange Traded Commodities Low margin requirement and stable market

Hedge against future markets volatility.

Fair Price Discovery based on Demand/Supply ratio.

Transparency, Screen Based Trading ( Process, Prices and Volume)

Creates Opportunity for Arbitrage between Two Exchanges, Contracts.

Provides quality Specifications or quality Norms.

Large Expanding Volumes

MCX (Multi commodity exchange)

Gold Exchange captures more than 85 percent market share in gold futures Multi Commodity Exchange of India Ltd (MCX), the golden exchange has emerged as the No. 1 commodity exchange in India by capturing more than 85 percent of the total gold futures trading volumes.

The daily volume in gold futures contracts exceeds 400 Kilograms and records open interest of more than 300 gilograms.

Commenting on the expanding bullion market, Mr. Jignesh Shah, managing director, MCX said, "We believe that the Indian gold market is on the verge of a huge transformation with the introduction of futures trading. Indian gold fabricators and exporters are participating in a large way to hedge their market risk on MCX. With increased participation and trading volumes, MCX is emerging as the Golden Exchange of the country"

He added that, "conservatively estimates have found that the Indian gold futures market is expected to multiply at 10 times the rate of the spot market in the next three years and this will create a market of 8,000 tons of Gold, valued at Rs. 4,80, 000 crores.

Optimistically calculating with a multiple of fifty, a standard multiple factor in markets of TOCOM and COMEX, the Indian gold futures market is expected to grow to a staggering size of 40,000 tons of gold, valued at Rs. 24,00,000 crores. The collective market size of all commodities put together is expected to be of the order of US$ 600 billion.

Further, this market is expected to reach over 5000 cities in all 550 districts of India, riding smoothly on state of the art technology & industry friendly facilities provided by MCX."

MCX began live trading from November 10, 2003. On the first day of trading, the maximum trading interest was witnessed in gold and that too in the first contract month. In the New Year, volumes surged to a new high of 214 Kgs (single side) as observed on January 5, 2004. Same bullish trends were noticed in the open interest and daily turnover figures.

At MCX the 'Trading Volume to Open Interest Ratio' is well in comparison to what is being witnessed in the globally established and matured commodity exchanges. It's distinguishingly noticed that there is not a single trading day on which the Open Interest has been reduced to ZERO, which is a positive signal of an emergence of extremely healthy market.

Key Shareholders:NSE(National Stock Exchange)Financial Technologies (India) Ltd.

State Bank of India Union Bank of India

State Bank of Indore Bank of India

State Bank of Hyderabad Canara Bank

Bank of Baroda Corporation Bank

Bank of Saurashtra SBI Life Insurance Co.

India in world gold market

ParticularIndia (in tons)World (in tons)% Share

Total stocks130001450009

Central bank holding400280001.4

Annual production226000.08

Annual recycling100 3001100 1200 13

Annual demand800370022

Annual Imports600

Annual Exports60

MCX Bullion Plus : MCX is amongst the top 3 Bullion Exchanges in the world

Average daily turnover in bullion is Rs. 1000 Crores

Average spread between Buy & Sell is Re. 1

With the Government of India allowing futures trading in Gold and Silver since October 2003,

For centuries Gold and Silver are well ingrained in the Indian

MCX has commenced futures trading in Gold & Silver on its online nationwide platform in November 2003 through its member network spread across the country and it is presently the most successful and liquid futures contract in India.

Indian Gold Market

Gold is valued in India as a savings and investment vehicle and is the second preferred investment after bank deposits. India is the world.s largest consumer of gold in jewellery as investment. In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to jewellers and exporters. At present, 13 banks are active in the import of gold.

Domestic consumption is dictated by monsoon, harvest and marriage season. Indian jewellery offtake 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 in India, as compared to the rest of the world, are insignificant, both qualitatively and quantitatively.

Characteristics of World Gold Market Gold market is highly liquid and gold held by central banks, other major institutions and retail jewellry 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.Important World Gold Markets London as the great clearing house

New York, the home of futures trading

Zurich as a physical turntable

Istanbul, Dubai, Singapore and Hong Kong as doorways

to high consuming regions

Tokyo where TOCOM sets the mood of Japan

Silver

Indian Scenario

Silver imports into India for domestic consumption fell sharply in 2002, down by 25% to a touch under 3,400 tons as against a record year in 2001 when around over 4,540 tons was imported.

Indian industrial demand is estimated to have fallen by around 13% in 2002, down from a record 1,579 tons the previous year to 1,375 tons. In spite of this fall, India is still one of the largest users of silver in the world, ranking alongside those Industrial giants, Japan and the United States.

GFMS data shows that Indian jewelry and silverware fabrication fell by close to 30% in 2002. Probably there are two main reasons for this, namely the price and the agricultural/ rural economy.

World Silver Markets

Silver is predominantly traded on the London Bullion Market and Comex in New York. The former, as the global hub of OTC (Over-The-Counter) trading in silver, is the metal.s main physical market. Comex, in contrast, is a futures and options exchange. It is here that most fund activity is focused. Silver is invariably quoted in US dollars per troy ounce.Factors Influencing Uncertain Supply & Demand of Silver

World mine production is more a function of the prices of other metals.

Often a faster growth in demand against supply leads to drop in stocks with government and investors. Silver demand stands on three pillers . jewellery & silverware, industrial and photography, which are in turn factors of monsoon & agricultural output, overall industrial growth and performance of the tourism & services industry

at large, respectively. In India the real industrial demand occupies a small share in the total industrial demand of silver in sharp contrast to most developed economy like Japan and US.

In India like Gold the Silver demand is also determined to a large extent by its price level and volatility. Hedging

Futures contract have been used as financial offsets to cash market risk for more than a century. Hedging allows a market participant to lock in prices and margins in advance and reduces the potential for unanticipated loss or competitive disadvantage.

A hedge involves establishing a position in the futures market that is equal and opposite to a position in the physical market. For instance a Gold jeweller who holds 1 Kg of Gold will hedge by selling (going short) on 1 Kg Gold contract. The principle behind establishing equal and opposite positions in the cash and futures markets is that a loss in one market should be offset by a gain in the other market.

NCDEX(national commodity and derivatives exchange)

Worlds Major Commodity Exchanges

Exchange Contract size Start date Price quotation Nature of trading Outright Initial margin (April 06)

NYMEX

HYPERLINK "http://www.nymex.com/" 100 oz 99.5% purity 31Dec74 US$/oz Continuous open outcry plus electronic trading via ACCESS Clearing member; member & hedge customer; $1,750 Non-member speculative $2,363

TOCOM

HYPERLINK "http://www.tocom.or.jp/" 1 kilo, 99.99% purity 23Mar82 Yen/gramme Continuous computerised 90,000

MCX

HYPERLINK "http://www.mcxindia.com/" 100g 1kilo, 3 kg 10 Nov 2003 Rp/10g Continuous computerised 4% (5% for the 100g contract)

NCDEX

HYPERLINK "http://www.ncdex.com/" 100g, 1 kilo, 99.99% purity 15 Dec 2003 Rp/10g Continuous computerised Membership fee: as a cash free security deposit

CBOT100 oz (Full-sized), 33.2 oz (Mini-sized), not less than 99.5% purity6 Oct 2004US$/ozContinuous computerised Per 100 oz contract: $2,430 (initial); $1,850 (maintenance).Per 33.2 oz contract:$743(initial);$550 (maintenance)

TurkDEX 100g4 Feb 2005 Turkish Lira/gramme Continuous computerised 'auction'Initial margin: 250 Turkish Lira per contract; Maintenance margin: 187,5Turkish Lira per contract

DGCX1Kilo 99.5% purityJune 2005 US$/oz Continuous computerisedUS$ 480 per contract

Gold

Where does the word Gold come from?

The word gold appears to be derived from the Indo-European root 'yellow', reflecting one of the most obvious properties of gold. This is reflected in the similarities of the word gold in various languages: Gold (English), Gold (German), Guld (Danish), Gulden (Dutch), Goud (Afrikaans), Gull (Norwegian) and Kulta (Finnish).Gold is a unique asset based on few basic characteristics. First, it is primarily a monetary asset,and partly a commodity. As much as two thirds of golds total accumulated holdings relate to store of value considerations. Holdings in this category include the central bank reserves, private investments, and high-caratage jewelry bought primarily in developing countries as a vehicle for savings.

A heavy, soft, ductile, malleable element. Most of this metal is kept in reserves but some is used in jewelery. Gold is commonly alloyed with Cu and Ag. Used in plating, dishes, and electronic parts. Gold is a precious metal, since gold has been prized for as an ornament, as a concentrated form of wealth, and for monetary use. The foremost use of gold is for monetary purposes, most of it being kept as bullion in reserve for notes issued. The next most important use is for Jewelery using either white, yellow, or green gold. Because of its softness the gold has to be mixed with copper, silver, nickel, or palladium. Its purity or fineness is designed in carats. 1 Carat means 1 part gold in24.Gold is used in dentistry, glass making and in the chemical industry.Gold has served as the most important monetary standard throughout history. It is measured in troy ounces and the price of gold is typically stated in terms of the cost of one ounce. Historically, the United States has fixed the price of gold. The price of an ounce of gold was fixed at $20.67 for many decades until 1934 at which point the price was raised to $35.00. In 1968 a two-tiered pricing structure was established, and by 1975 the price of gold was allowed to fluctuate. In January of 1980 the price of gold reached its peak, and by the year 2000 the price dropped to $272.

How much gold is there in the world?

At the end of 2001, it is estimated that all the gold ever mined amounts to about 145,000 tonnes.

Who owns most gold?

If we take national gold reserves, then most gold is owned by the USA followed by Germany and the IMF. If we include jewellery ownership, then India is the largest repository of gold in terms of total gold within the national boundaries. In terms of personal ownership, it is not known who owns the most, but is possibly a member of a ruling royal family in the East.

If all the gold was laid around the world, how far would it stretch?

If we make all the gold ever produced into a thin wire of 5 microns (millionths of a metre) diameter the finest one can draw a gold wire, then all the gold would stretch around the circumference of the world an astounding 72 million times approximately!How much new gold is produced per year?

In 2001, mine production amounted to 2,604 tonnes or 67% of total gold demand in that year. How much does it cost to run a gold mine?

Gold mining is very capital intensive, particularly in the deep mines of South Africa where mining is carried out at depths of 3000 meters and proposals to mine even deeper at 4,500 meters are being pursued. Typical mining costs are US $238/troy ounce gold average but these can vary widely depending on

mining type and ore quality. Richer ores mined at the surface (open cast mining) is considerably cheaper to mine than underground mining at depth. Such mining requires expensive sinking of shafts deep into the ground.

History of Gold

4000 BC Gold is first known to be used in parts of Central and Eastern Europe. The Egyptians master the arts of beating gold into leaf and alloying gold with other metals to achieve variations in hardness and color. They also develop the ability to cast gold, using the lost-wax technique still used in today's jewelry industry. The Sumer civilization of southern Iraq uses gold to creat a wide range of jewelry, often using sophisticated and varied styles still worn today. 1352 The young Egyptian King Tutankhamun is interred in a pyramid tomb laden with gold, his remains laid in an extravagant gold anthropoid sarcophagus. 1350 The Babylonians begin to use fire assay to test the purity of gold. 1091 Squares of gold are legalized in China as a form of money. 560 The first coins made purely from gold are minted in Lydia, a kingdom of Asia Minor. 58 Julius Caesar seizes enough gold in Gaul (France) to repay Rome's debts. The Byzantine Empire resumes gold mining in central Europe and France, an area undeveloped since the fall of the Roman Empire. Artisans of the period produce intricate gold artifacts and icons. 1100 Venice secures its position as the world's leading gold bullion market due to its location astride the trade routes to the east. Venice introduces the gold Ducat, which soon becomes the most popular coin in the world, and remains so for more than five centuries. Great Britain issues its first major gold coin, the Florin, which is followed by the Noble, the Angel, the Crown, and the Guinea.

1511 King Ferdinand of Spain sends explorers to the Western Hemisphere with the command to "get gold." Isaac Newton, Master of the London Mint, sets price of gold that lasts for 200 years. 1787 First US gold coin is struck by Ephraim Brasher, a goldsmith.

1792 The Coinage Act places the young United Sates on a bimetallic silver/gold standard, defining the U S Dollar as eq i alent to 24 75 grains of fine gold and 371 25 grains of fine silver the U.S. Dollar as equivalent to 24.75 grains of fine gold, and 371.25 grains of fine silver.

1803 North Carolina site of first US gold rush. The state supplies all the domestic gold coined for currency by the US Mint in Philadelphia until 1828.

1848 The California gold rush begins when James Marshall finds specks of gold in the water at John Sutter's sawmill near the junction of the American and Sacramento Rivers.

1850 Edward Hammong Hargraves, returning from California, predicts he will find gold in Australia within one week. He discovers gold in New South Wales within one week of landing.

1859 The Comstock Lode of gold and silver is discovered in Nevada. As a result, Nevada is made a state five years later.

1886 George Harrison, while digging stones to build a house, discovers gold in South Africa.

1887 Glasgow doctors, Robert and William Forrest, and chemist John S. MacArthur patent the process for extracting gold from ore using cyanide.

1896 Two prospectors discover gold while fishing in the Klondike River in northern Canada, richer finds were rumored farther south in Alaska's Yukon, spawning the Alaska Gold Rush in 1898 -- the last gold rush of the century. 1900 US adopts the gold standard for its currency.

1903 The Engelhard Corporation introduces an organic medium to print gold on surfaces. First used for decoration, the medium becomes the foundation for microcircuit printing technology.

1922 King Tutankhamun's tomb (1352 BC) opened to reveal a 2,448 lb. gold coffin and hundreds of gold and gold-leafed objects (including the mask pictured at the beginning of this section).

1927 A Medical study in France proves gold to be valuable in treatment of Rheumatoid arthritis.

1933 President Franklin D. Roosevelt bans the export of gold, halts the convertibility of dollar bills into gold, orders US citizens to hand in all the gold they possess and establishes a daily price for gold. 1934 Roosevelt fixes price of gold at $35 per ounce.

1935 Western Electric Alloy #1 (69% gold, 25% silver and 6% platinum) finds universal use in all switching contacts for AT&T telecommunications equipment.

1944 The Bretton Woods agreement sets an international gold exchange standard and creates two new international organizations, the International Monetary Fund (IMF) and the World Band. The new standard sets par values for currencies in terms of gold and obligates member countries to convert foreign offical holdings of their currencies into gold at these par values. 1947 The first transistor, the building block for electronics, is assembled at AT&T Bell Laboratories. The device uses gold contacts pressed into a germanium surface.

1960 The laser is invented using gold-coated mirrors to maximize infrared reflection.

1961 Modern-day mining begins in Nevada's Carlin Trend, ultimately making Nevada the nation's largest gold-mining state.

1968 Intel introduces a microchip with 1 024 transistors connected by gold circuits

1969 Gold coated visors protect the astronauts' eyes from searing sunlight on the moon (Apollo 11 moon landing).

1970 The charged coupled device is invented, using gold to collect electrons generated by light, eventually used in hundreds of military and civilian devices, including video cameras.

1971 The colloidal gold marker system is introduced by Amersham Corporation of Illinois. Tiny spheres of gold are used in health research laboratories worldwide to mark or tag specific proteins to reveal their function in the human body for the treatment of disease. 1973 The U.S. Dollar is removed from gold standard, and gold prices are allowed to float free. By June, the market for gold in London reaches more than $120 per ounce.

1974 On December 31, US government ends its ban on individual ownership of gold.

1976 The Gold Institute is established in Washington, D.C., to promote the common interests of the gold industry by providing statistical data and other relevant information to its members, the media, government, and the public. 1980 Gold reaches intra-day historic high price of $870 on January 21 in New York.

1986 Gold-coated compact discs are introduced.

1987 Airbags are introduced for cars, using gold contacts for reliability.

1996 The Mars Global Surveyor is launched with an on-board gold-coated parabolic telescopemirror that will generate a detailed map of the entire Martian surface over a two-year period.

1997 Congress passes Taxpayers Relief Act, allowing US Individual Retirement Account holders to buy gold bullion coins and bars for their accounts as long as they are of a fineness equal to, or exceeding, 99.5 percent gold. 1999 The Euro, a pan-European currency, is introduced, backed by a new European Central Bank holding 15 percent of its reserves in gold.

2000 Astronomers at the Keck Observatory in Hawaii use the giant gold-coated mirrors of the observatory's twin telescopes to produce the most detailed images of Neptune and Uranus ever captured.Market IntroductionAs a gold market, New York has only really come into its own since 31 December 1974 when Americans were once again permitted to buy and sell gold freely for the first time since 1933. In the intervening years the gold business had been strictly licensed through a handful of banks, such as Republic National Bank of New York and Rhode Island Hospital Trust National Bank which supplied gold to authorised jewellery and industrial fabricators. But once those restrictions were lifted, the New York market developed in its own unique way through futures (and later options) trading. The concept of futures had developed in Chicago in the 1830s essentially for agricultural projects. The application to gold came only in the 1970s, initially at the Winnipeg Commodity Exchange in Canada, but then on COMEX (Commodity Exchange Inc.) in New York and at the Chicago Board of Trade and the Chicago Mercantile Exchange from 1975. They brought a completely new dimension to gold trading, but ultimately it was COMEX which set the pace, so that today it is COMEX (now a division of NYMEX) that is the heart of America's gold market. As one writer put it, "The world of gold stays awake for COMEX".

In parallel with COMEX as the great terminal market, however, an increasing amount of gold trading is done outside the exchange by market-makers in spot, forward and over-the-counter options. This is often known as 'the upstairs market'. But its volumes are not recorded. So COMEX remains supreme in terms of a formal market with its transactions closely recorded and

observed by analysts.

Features of Indias Gold Economy

India has been known to possess large stocks of gold and studies show that they are mostly accumulations from centuries of trading rather than result of production of her mines. What is of contemporary interest, however, relate to the demand, supply and price-movements and their link with policy. Some broad generalizations on these aspects would be appropriate to review the

policy and identify the issues.

First, on the demand side, while there are no authentic estimates, the available indications are that about 80 per cent is for jewellery fabrication (mainly of over 22 carat purity) for domestic demand, 15 per cent is for investor-demand (which is relatively elastic to gold-prices, real estate prices, financial markets, tax-policies, etc.) and barely 5 per cent is for industrial uses. The demand for gold jewellery is rooted in the societal preference for a variety of reasons viz. Religious, ritualistic a preferred form of wealth for women and as a hedge against inflation. It will be difficult to prioritize them but it may be reasonable to conclude that it is a combined effect, and to treat any major part as exclusively a store of value or hedging instrument would be unrealistic. Nor would it be realistic to assume that it is only the affluent who create demand for gold. There is reason to believe that a part of investment demand for gold assets is out of black money. The annual consumption of gold which was estimated at 65 tons in 1982 has increased to 505 tons in 1995. Although it is likely that with prosperity and enlightenment, there may be deceleration in demand, particularly in urban areas, it would be made good by growing demand on account of prosperity in rural areas. In the near future, therefore, the annual demand will continue to be high at around 400 to 500 tons.Second, as the domestic production of gold is very limited, around 2 tons per year, and supply from fabricated old gold scraps estimated at around 62 tons per year being not adequate, the rising demand has to be sourced from outside the country. In the face of a virtual ban on official import of gold for domestic consumption till 1990, the rising demand was met by illegal imports. During the period 1968 - 1995, smuggled gold into India varied in the wide range of 10 217 tons per year with the sole exception of 1980 when 9 metric tons were reported to have been smuggled out of the country to take advantage of the soaring gold prices in the international market. However, the situation changed drastically during the nineties since the proportion of smuggled gold in our total supplies has gone down substantially. While currently there are some efforts to promote gold mining domestically, especially involving private sector, there are no indications that domestic supply would increase in any perceptible manner.

Third, the strong domestic demand for gold and the restrictive policy stance are reflected in the higher price of gold in the domestic market compared to that in the international market at the available exchange rate. During the 19-year period from 1977-78 to 1995-96, the average spread between Mumbai and London market prices (Mumbai price less London price in rupee terms) of

gold has been positive except for a brief period during 1980-81 when the international gold price zoomed briefly, following the oil crisis, the persistent weakening of the US dollar resulting in flight of dollar resources into gold and accelerating world-wide inflationary trends. The average spread was as high as 41.3 per cent during 1977-79 which rose to 46.6 per cent during 1981-85 and further to 56.6 per cent during 1986-91. In the post-liberalisation period, with changes in the exchange rate regime and some relaxations on the import regime of gold, the average spread between domestic and international prices has come down from 53.1 per cent in 1991 to 20.6 per cent in 1993, 20.1 per cent in 1994, 19.9 per cent in 1995 and further to 17.5 per cent in 1996 (up to October). In the absence of open import, the domestic gold prices relative to international prices appear to have been governed by two factors: (i) the spread between the official and market exchange rate of the rupee and (ii) the customs duty, transportation cost, storage cost, risk premia, etc.Fourth, the value of gold imports through official channels increased from $ 1.25 billion in 1992 to $ 3.4 billion in 1995 while that of smuggled gold was in the range of $ 1.2 to $ 1.7 billion. Viewed from any angle, gold import has emerged, in terms of importance in our foreign trade.

Fifth, as the policy-debates would show, the management of demand and supply of gold has important policy implications for fiscal policy and exchange rate management, and in the recent times, use of gold as a financial instrument, especially mobilisation of domestic gold has attracted attention.What makes Gold Special?

Timeless and Very Timely Investment:

Gold is an effective diversifier: Gold is the ideal gift: Gold is highly liquid: Gold responds when you need it most: Gold Production Company (000) Ounces

American Reclamation5

Apollo Gold107

Barrick Gold Corp.1,949

Canyon Resources Corp.30

Coeur Rochester, Inc69

Cripple Creek & Victor Gold Mining329

Glamis Gold Inc.154

Golden Phoenix Minerals, Inc.4

Hecla Mining0.2

Kennecott465

Kinross Gold Corp.435

MK Resources Co./Quest4

Newmont Mining2,376

Placer Dome Inc.1,263

Plum Mining Co., LLC3

Queenstake Resources USA, Inc.243

Robinson Nevada Mining Co.12

Round Mountain Gold Corp.763

Western Goldfields, Inc.27

Wharf Resources, Inc.76

Other40.8

Total8,355,000

Properties of GoldResistance to Corrosion: Gold is the most non-reactive of all metals. It is benign in all natural and industrial environments. Gold never reacts with oxygen (one of the most active elements), which means it will not rust or tarnish. The gold death-mask in the tomb of Tutankhamun looked as brilliant when it was unearthed in 1922 as when it was entombed in 1352 BC.

Electrical Conductivity: Gold is among the most electrically conductive of all metals. Since electricity is essentially the flow of charged particles in a current, metals that are conductive allow this current to flow unimpeded. Gold is able to convey even a tiny electrical current in temperatures varying from -55 to +200 centigrade. This makes gold a vital component for electrical connectors in computers and telecommunications equipment.

Ductility and Malleability: Gold is the most ductile of all metals, allowing it to be drawn out into tiny wires or threads without breaking. As a result, a single ounce of gold can be drawn into a wire five miles long. Gold's malleability is also unparalleled. It can be shaped or extended into extraordinarily thin sheets. For example, one ounce of gold can be hammered into a 100 squarefoot sheet.

Infrared (Heat) Reflectivity: Gold is the most reflective and least absorptive material of infrared (or heat) energy. High purity gold reflects up to 99% of infrared rays. This makes gold ideal for heat and radiation reflection, as in life-saving face shields for astronauts and firefighters.

Thermal Conductivity: Gold is also an excellent conductor of thermal energy or heat. Since many electronic processes create heat, gold is necessary to transfer heat away from delicate instruments. For example, a 35% gold alloy is used in the main engine nozzle of the Space Shuttle, where temperatures can reach 3300 centigrade. Gold alloy is the most tenacious and long-performing material available for protection at these temperatures.

Gold and the money supply

In January 1959 US M3 money supply was $288.8 billion, and the Official Gold Holdings of the United States was then 17'335.1 Tonnes, or about 557 million ounces (there are 32,150.7 Troy Ounces in a Tonne). That means that in 1959, there were $518 in circulation for every ounce of gold reserves held by the USA. Although the theoretical price should then have been $518 per ounce, the actual price, as fixed under the gold standard was only $35 an ounce.

By August 2005, the US M3 money supply had risen to $9'873.9 billion, whilst at the same time the Official Gold Holdings of the United States had fallen to just 8'133.5 Tonnes, or about 261 million Troy Ounces. This means that today, in 2005, there are $37'831 in circulation for every ounce of gold held by the United States.

Gold in investment portfolios

As a tangible investment gold is sometimes held as part of a portfolio because over the long term gold has an extensive history of maintaining its value. It has in the last century gained ground in relation to fiat currencies owing to inflation. Gold becomes particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. People who enjoy investing in gold are known as gold bugs. Futures contracts based on gold currently trade on various exchanges around the world. In the US this occurs primarily on COMEX (Commodity Exchange) which is a subsidiary of the New York Mercantile Exchange. Recently, gold-based ETFs like GLD have emerged as a more convenient investment vehicle.

WORLD GOLD DEMANDCOUNTRY1996(tons)1997(tons)1998(tons)1999(tons)2000(tons)

India506.98736.84814.91838.86855.34

USA331.56362.04428.29459.71387.55

China374.48406.83314.45343.38329.38

SE asia329.69204.0451.63265.62267.18

Saudi184.75199.06208.39199.37221.14

Turkey153.03201.86172.00139.03207.15

WORLD GOLD PRODUCTION1840-18501851-18751876-19001901-19251926-19501951-19751976-2000

557 4790 5670 14852 21779 30649 45235

List of London Bullion Market Association Approved Gold Suppliers

Belgium

Brazil

Canada

China

Colombia Germany

Hong Kong Indonesia Italy

Japan

Kazakhstan KoreaKyrgyz Mexico

Netherlands

Philippines

Russia

South Africa

Spain Sweden Switzerland

United Kingdom USA

Uzbekistan

Zimbabwe

Why invest in gold?

portfolio diversification preservation of wealth risk factors HOW TO BUY GOLD? Coins and small bars

Exchange traded gold

Gold accounts

Gold certificates

Gold oriented funds

Structured productsIndian Government Policy for Bullion 1947 - Complete ban on Import of Bullion

1956 - Mysore Government controlled production of Gold

1962 - Govt. floated 15 years 6.5% Gold Bond by which around 16.30 MT Gold was collected

1962 - Ban on Forwarding Trading

1963 - Declaration of Gold holding made compulsory for individual. Restriction on manufacturing of jewellery above 14 Ct.

1964 - Restriction on private trade, Gold handling canalised by Govt only

1965 - Floating of 15 years 7% Gold Bonds (6.1 MT Gold Collected)

1965 - Floating of 15 years 6.5% National Defence Gold Bond (13.7 MT Gold Collected)

1966 - Restriction on manufacturing of jewellery above 14 Ct removed

1966 - Ceiling on holding of Gold by individual

1966 - Control imposed on refinery & dealer

1968 - Formulation of Gold Control Act, 1968

1975 - Introduction of Voluntary disclosure of Income and Wealth (amendment) Ordinance 1975 - for declaration of income and wealth in the form of Gold

1978 - Govt. auctioned Gold through RBI to control inflation and banned further auction

1991 - Amendment brought into Gold Control Act permitting holding of Gold not only in the form of jewellery but also in the form of bars

1991 - Import of Gold against SIL permitted

1991 - NRI to bring 5-Kgs Gold against payment of Custom duty @ Rs.220/= per 10 Gram

1992 - Recommendation by RBI to Govt for Formation of Gold Management corporation

1992 - Proposal of formation of Gold Bank rejected

1992 - Formation of Gold Standing committee to keep track of movement of Gold and other precious metals

1993 - 41 MT of Gold mobilised under gold Bond Scheme

1997 - Gold Import put under OGL through nominated agencies

1997 - Gold import by NRI increased to 10 Kgs.

1998 Custom duty increased to Rs.250/- per 10 Gram of Gold against Rs.220/=

1999 - Gold Bond Scheme announced by RBI (15/9/99)

2003 Custom duty reduced to Rs.100/- per 10

BULLION REPORT BY NCDEX

The Bullion Report March 2006

Precious metals shot to fresh multi year peaks in March, with silver marking a

23 year high at $11.76 /troy oz and gold putting on its best performance since

1981 to touch $ 584 / troy oz. The month saw gold stage a dramatic recovery after slumping to a low of $ 535 on March 10, to rise by nearly 9% to close the month at $ 582 per troy ounce. This steep rise was facilitated to a significant extent by a weaker dollar against the euro especially during the last week of March (see Figure 1). The domestic market was in line with the firm trend in overseas markets as gold prices scaled an all time high of Rs 8542 / 10 grams by the end of the month.

Factors Driving up Gold Price

Depreciation of the Dollar against the Euro

The US dollar had its first quarterly decline in a year against the euro on speculation that interest rate increases by the European Central Bank will begin to outpace moves by the Federal Reserve. The fresh fall of the dollar by more than 2 percent this month on a point to point basis boosted gold buying. A weaker dollar makes dollar denominated bullion cheaper for other currency holders and thus lifts gold buying.Expectation of Silver ETF(Exchange Traded Fund) Golds recent gains are largely the result of speculators encouraged by silvers rally. Demand for gold is expected to rise as ETFs make it easier for investors to own bullion. Silver has risen on anticipation of the approval of the first fund of the precious metal. Curb on Central Bank Sales Gold is likely to receive support from the European Central Banks recent announcement that it had sold 57 tonnes of gold as part of the 2004 central banks gold sales agreement and that it does not plan any further gold sales in the next six months.Likely Silver Spot Trading on Shanghais Gold Exchange Also driving the bullish sentiment were reports that Chinas Shanghai Gold Exchange hopes to launch the countrys first ever spot silver trading on the bourse in July this year.

sentiment and spurring inflationInvestment Funds driving up price Interest in commodities by investment funds have also helped fuel the rally in gold prices. Funds have been the biggest buyer this year, going beyond the level of purchases by jewelers, who accounted for 73% of demand last year. Investment in StreetTracks Gold Funds has increased to $6.5 billion since the funds began trading on the New York Stock Exchange in November 2004.

Factors affecting GoldA constant issue in the gold market is what influences the price. Most people logically believe the supply and demand figures in the physical gold market will determine the price.However, the futures market in New York is the single largest place in the world where more gold contracts are traded than any other. The price at which the physical gold changes hands, in almost all cases, depends on the price at the New York exchange. Practically all gold bullion and gold coin dealers will base the price of their transactions on this price.

Therefore, the supply and demand at the NY exchange is probably the single most important factor (at least in the short term) in determining the outlook for the gold price. We can see large changes in the supply or demand in the physical market, but if the price does not first change at the exchange it is not likely to change the price of the physical gold.

Of course, in the longer term, supply and demand in the physical market will cause the futures market to change accordingly, but significant and sustained changes in the physical gold market are few and far between.

Weak US Dollar Projections about a declining dollar due to an ever-increasing twin deficit supported by many investment veterans are met by much denial from politicians as well as from investors. As long as foreigners are willing to pour in the amount of $2 billion dollars every working day, the dollar won't crash. But if foreign confidence were to wane, the US dollar will be heading south. No matter how you look at the US twin deficits and America's future fiscal liabilities, this problem is huge and some painful adjustments not only seem to be necessary but unavoidable as well. It should be obvious that one of these major painful adjustments will be a massive devaluation of the US dollar. It seems that the idea of a dollar devaluation is gaining support from the Fed when the President of the Dallas Fed, Robert McTeer recently said: "over time, there is only one direction for the dollar to go - lower." Former ECB president Wim Duisenberg, quoted by Spanish Newspaper El Pais, recently said: "A dollar devaluation seems inevitable due to the tremendous US Current Account deficit." Furthermore he recently said on Dutch television that we can only hope and pray for a smooth economic transition in the US. Why is this so important? Simple, the US dollar is the key driver for Gold; as the dollar goes, so will gold; but in the opposite direction. Gold is the anti-dollar with a high inverse correlation to the dollar! In the end, gold is still a monetary asset and trades like a currency. Growth in Demand for JewelryIn spite of the convergence of Diamond and Palladium, the demand for gold jewelry has seen a regular growth year on year. Countries which are primarily responsible for this growth are India, China, Italy, Turkey and the USA. The demand for consumption of gold in jewelry was 6% higher at 735 tonnes and also comprised a new first-quarter record. The US, which accounts for 10 % of world gold demand, is also one of the markets where public taste in gold jewelry is enjoying a renaissance. The renewed interest in gold also extends to Japan, a market which showed a 19% increase in demand. The Indian market the worlds largest for gold demand was 23 % higher following the marriage and festival period which, in turn, has led to restocking by retailers. The earthquake in India, however, is unlikely to hit demand significantly as it occurred in an area which comprises only 5% of the total Indian consumption. There were sharp falls in demand in Turkey and Taiwan - down 38% and 31% respectively. This was due to economic difficulties and continued weakness in investment demand.

Increase in demand for exchange traded paper backed productsFor the first time in history, gold can be purchased like any listed stock at select stock exchanges of the world like London Stock Exchange, Australian Stock Exchange (Gold Bullion Securities) and New York Stock Exchange (StreetTracks Gold). The World Gold Council initiated Electronic Traded Funds have displayed very good performance and growth in volumes since launch.

Which Way the Gold Price Change? Our Opinion It may come as a surprise that we do not often venture a strong opinion as to the future direction of the gold price. We do not pretend to be experts at prediction of market prices, indeed we believe that there are very few people who could claim consistent success at predicting future gold price movements. We also prefer to point out obvious and potential fundamental factors, and allow our customers to form their own judgements. As at February 2000, we believe we can envisage one important factor which may have a significant effect on the gold price over the next few years. First, The Past! In any attempt to foresee the future, it is necessary to look at history, to see what insights we may be able to glean from the past. We do not intend to give here a full analysis of past gold prices, but we will attempt to give a brief summary. From 1100 AD to 1931 AD, when Britain abandoned the gold standard, the price of gold remained steady at about 3.89, apart from a few brief "blips" in either direction. In 1935 the US Treasury fixed the price of gold at $35 per ounce, although the aim was to stabilise the dollar. Britain devalued the pound from $4.03 to 2.80 in 1949, or in terms of gold, from 8.68 to 12.50 per ounce. In December 1971 (we have seen a date quoted as August 15th), the dollar was devalued to $38 per ounce from $35, and again in February 1973 to an "official" price of $42.22, and even this was abandoned by November 1973. From then the dollar "floated" although "sank" may be a more accurate description, until gold reached $850, just under 400, per ounce in 1974. As with most huge price upheavals, this increase was overdone, and gold has since fluctuated down to about $270, back to $350, and is currently around the $300 per ounce level. Until the past few months, our view of gold trends is that the price would stay in the recent range for the next few years and more. Central Bank SalesDuring the last decade, many central banks have been reducing the proportion of gold held as part of their currency reserves. We believe that this is probably a reasonable, sound move in keeping with modern theories of currency and foreign exchange management, after all most currencies are now token currencies, their value being related more to the general perception of their worth, dictated by trade imbalances and supply and demand. Whether it proves to be a completely sound principle will probably not be fully known for another fifty years or so. We are aware that the World Gold Council has consistently argued against Central bank sell-offs, but as it is financed by the gold producers, this is only to be expected. The effect of the Central bank sales has been to significantly increase the supply to the market, and it has understandably has the effect of reducing gold prices. Within the next few years, we believe that Central bank sales will slow down, perhaps stop, and it is entirely possible that they may eventually return as net gold buyers, particularly on any weakness in the gold price. Obviously the reduction or cessation of a flow of Central banks gold onto the market will exert an upward pressure on prices.

Producer HedgingAlthough prices recently rose on announcements that several gold producers were to stop or reduce their hedging activities, whereby they borrow gold, sell it, invest the proceeds, and repay the gold from future production, we believe that this probably reflects their longer term views of market fundamentals, rather than being in itself a prime influence on market prices. If the gold miners believe that it will in the near future be advantageous for them to stop short-selling, then presumably their analysts believe that firmer prices are likely. An Upward Trend As the world demand for gold has absorbed quite large quantities of Central banks gold stocks over the past decade, with only a fairly small downward effect on prices, we believe that gold prices are more likely to increase over the next few years than to decrease. Certainly the upside potential must now be considerably stronger than the downside potential. THE USES OF GOLD

Gold's superior electrical conductivity, its malleability, and its resistance to corrosion have made it vital to the manufacture of components used in a wide range of electronic products and equipment, including computers, telephones, cellular phones, and home appliances.

Gold has extraordinarily high reflective powers that are relied upon in the shielding that protects spacecrafts and satellites from solar radiation and in industrial and medical lasers that use gold-coated reflectors to focus light energy. And because gold is biologically inactive, it has become a vital tool for medical research and is even used in the direct treatment of arthritis and other intractable diseases.

ELECTRONICS AND TELECOMMUNICATIONS

COMPUTERS/SEMICONDUCTORSMillions of computers are manufactured worldwide each year and gold plays an active role in their many components. The most important use of gold is as a fine wire that connects circuits to the semiconductors.

POWERCHAIRSComputerized wheelchairs, called power chairs, allow disabled patients further control over their movements and a renewed sense of independence. At the heart of the computerized controls is a tiny, but powerful, Motorola microprocessor connected to the wheelchair's controls by gold wire and gold-coated connector pads. SPACECRAFT

To protect the onboard computers in the Galileo space probe from short circuiting as a result of heavy bombardment, NASA developed a Heavy Ion Counter (HIC). The HIC contains silicon wafers with gold electrodes that detect the heavy ions as they penetrate the wafers. Use of the HIC allows NASA engineers to monitor the functioning of onboard computers and make adjustments when necessary.TELEPHONES

Behind the protective cover of every telephone mouthpiece is a miniature transmitter that contains gold in one of its central components, the diaphragm. A gold-plated dome in the diaphragm works with the other mouthpiece components to transcribe voice vibrations into an electrical current. Gold is used in this application because of its permanence, particularly in public phones that are exposed to outdoor weather conditions.TELEPHONE WALL JACKSBecause gold conveys a superior signal, it is used to coat billions of contacts for phone jacks and connecting cords throughout our nationwide telephone system. The phone wall jacks are goldcoated to assure the customer of the convenience of moving the phone from one wall jack to another while maintaining clear static-free conversation.TVs AND VCRs

The micro circuitry in televisions is composed of fine lines of gold circuits connected by hair-thin gold wires to the micro-electronic circuit chips that process broadcast signals into a TV picture. Cables connecting television sets to videocassette recorders are coated to assure clear relay of television signal. MEDICINE AND HEALTHGold is valuable to modern medicine because it is non-toxic and biologically benign; one of the most efficient conductors of electricity, and its density enables it to be seen under electron microscopes. And although gold is virtually indestructible, it is a soft metal, easy to work with, shape, flatten or draw out into microscopic strands. DENTISTRYMost gold used in dentistry is in the form of alloys, which are mixtures of gold and other metals, such as platinum, palladium, silver, copper and zinc. Gold is non-toxic and biologically inert, which makes gold ideal for use in dental procedures. It is easy for the dentist to manipulate, but strong, stiff, durable and tough -- it never wears or tarnishes. It is a very resistant to chemical attack and does not corrode.

EYE SURGERYAccidents, disease or surgery may cause a condition called Lagophthalmos, which is the inability to close the eyelids fully. In order to keep the eyelids moist, doctors previously resorted to sewing the eyelid half shut, but a new gold eyelid implant is now the current form of treatment. These gold "eyelid load implants" are surgically inserted into the upper lid and allows the eye to blink normally. The muscle that opens the eyelid works to hold the eyelid open; then, when the muscle relaxes, gravity exerted on the gold causes the eyelid to drop. Gold is the best choice for this device as it does not corrode and will not react with tears. LASERSOne of the most promising new areas of medical treatment is in the use of ion lasers, the interior surfaces of which are coated with gold to control the focus of the beam. In one development, gold vapor lasers create a high intensity red light with the required wavelength to seek out and selectively destroy cancerous cells without harming healthy neighbouring cells. A new lightweight laser, designed by the military and using gold plated contacts, enables medics to seal battlefield wounds in the field, thereby reducing blood loss and improving survival chances for the seriously wounded. In hospitals, this new design will allow lasers to be brought to critically injured emergency patients without moving them, saving minutes and lives.Surgeons use gold instruments to clear clogged coronary arteries. Injection of microscopic gold pellets helps retard prostate cancer in men. Some forms of cancer are treated with colloidal gold. Lasers with gold-coated parts literally give new life to patients with once-inoperable heart conditions and tumors. Thermometer:Gold is a key component of modern thermometers that can read human body temperature in two seconds, just by holding the thermometer against the outer ear. The readings are accurate because the eardrum shares the same blood vessel system as the hypothalamus, the organ that controls the core body temperature. The thermometers contain a gold coated tube -- known as a "waveguide" -- that directs heat from the ear to the temperature sensing element in the device. Waveguides have been essential components of electronic systems such as radar and microwave telecommunications. Since gold is the most heat-reflective metal, none of the heat radiated from the ear will be lost warming up the tube of the thermometer. Research: Laboratory coupling of tiny gold particles with DNA has produced new microscopic structures that are opening a range of research, treatment and diagnostic possibilities in fields such as biochemistry, genetics and medicine. Soon doctors will be able to test patients for infections, cancer, AIDS, and other diseases and get immediate results by using genetic probes affixed with clusters of gold molecules that adhere to targeted DNA material. Scientists at the Massachusetts Institute of Technology (MIT) developed a microchip, the size of a human thumbnail, with more than 1000 separate tiny compartments that can hold medications in solid, liquid, or gel form, and dispenses them from under the patient's skin. The silicon chip is covered with thin gold foil. Medicine is released when a tiny electrical charge is applied between the gold cover and a gold electrode, opening the desired compartment.

Astronomy: The world's largest telescope, located at the Keck Observatory, uses gold in its internal workings. Located atop the 13,796-foot-high Mauna Kea volcano in Hawaii, the observatory is composed of twin telescopes, Keck I and Keck II, and each is equipped with a 2l-inch secondary mirror that is coated with 99.9-percent pure gold. Copy Machines: Copy machines use very high temperatures to affix the copy image onto the paper. These machines use gold-coated mirrors to reflect the heat efficiently, and produce copies for millions of businesses every day.

Photo CDs: Eastman Kodak Company has developed a Photo CD System that uses gold as the reflective surface. Photofinishers can transfer, in a digitized format, 35mm negatives or slides to compact discs holding up to 100 images on a disc. Once on disc, images can be viewed on television or computer screens. An interesting example of how this system can be used is demonstrated in a project for the National Park Service in which all items left at the Vietnam Veterans Memorial are photographed, catalogued, and compiled onto gold-coated photo CDs.

Satellites: Military and commercial communications satellites circling the Earth use gold in many important ways. Circuitry and chemically clean gold wires provide permanently static-free signals in rebroadcasting signals back to Earth. Electronic circuitry boxes are gold coated to protect the electronic devices from cosmic ray degradation and solar bursts. Gold-coated Mylar sheets are wrapped around the main body of satellites to reflect away the intense solar heat that would otherwise degrade the satellites' performance. Gold is essential in satellites because of its reflectivity, conductivity, and resistance to corrosion.

Security Systems: Security systems require long-term unattended reliability. The infrared reflective properties of gold are used in infrared viewing equipment for home and office security systems. These nighttime security cameras can view areas at night without the need for visible light.

Industry and Aviation

Airbags: Gold is used in automobile airbag deployment systems, where a sensor device is placed inside the car near the front bumper. This sensor contains gold-plated electrical contacts that, when activated, send the signal for the airbag to deploy. Because of its dependable electrical conductivity and its resistance to corrosion and tarnish, gold is the only metal that meets the quality requirements for this life-saving feature.

Aircraft Engines: Gold plays a vital role in the engines of military and civilian aircraft. Gold is a major constituent of a brazing alloy used in the manufacture of two assemblies -- stators and tubes. These two assemblies are integral to maintaining airflow and air compression necessary for combustion engine operation. Gold also plays a key role in aircraft electronics and guidance systems.

Aircraft Windows: Many domestic and military aircraft use gold-coated acrylic windows in the cockpit. In cold weather, these windows, carrying an electric current, help eliminate frost that might diminish the vision of the pilots. These thin coatings of gold also help avert fogging as the plane ascends through moisture-laden clouds. During warmer weather, gold's reflectivity helps maintain cool cockpit temperatures on hot runways. In flight at high, cold altitudes, gold's thermal conductivity helps retain the heat of the cabin, keeping the crew warm.

Engine Systems: Gold-plated connectors in the sensors for ignition and exhaust monitoring ensure long-term efficiency of automobile engine operation. Gold is integral in maintaining car efficiency. Gold plated connectors and contacts that operate in a car's engine require materials that can withstand the high-temperature and corrosive environment.

Fire Bunker Gear: When a disaster occurs, such as an airplane crash or hazardous chemical fire, firefighters must wear protective "bunker gear" so they can get close enough to the fire to control it. In close proximity to intense heat, firefighters need to protect their eyes while maintaining the ability to see the fire scene clearly. Bunker gear head coverings have protective face heat shields that are coated with a thin layer of gold. Gold has been used for several years in this safety-related application because of its heat and infrared reflectivity.

Food- Freshness Sensors: Gold-coated sensors provide the food industry with a system for measuring carbon dioxide gas, which is necessary to prevent spoilage of fruits and vegetables. Gold sensors are also important in maintaining carbon dioxide levels required to extend the shelf life of packaged and stored foods. The sensors containing gold are unaffected by high humidity, an environment that is needed for growing mushrooms, for example. Gold is inert, so it will not react with other elements

Protection of Air Force One: Air Force One, the airplane used by the President of the United States, is equipped with gold-plated reflectors. These reflectors confuse an incoming missile's heat-seeking signal, making it difficult for missile's guidance systems to focus on their target.

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