CHAPTER-1

INTRODUCTION

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INTRODUCTION

PORTFOLIO MANAGEMENT

Portfolio is a group of financial assets such as shares, stock, bonds, debt investment,

mutual fund, cash equivalents, etc ., A portfolio is planned to stabilize the risk of non-

performance of various peoples investment.

Management is the organization and co-ordination of the activities of an enterprise in

accordance with well-defined policies and achievement of its pre-defined objectives.

INVESTMENT

The retail investors could have done very little to actually invest in commodities such as gold and

silver or oilseeds in the futures market. This was nearly impossible in commodities except for gold and

silver as there was practically no retail avenue for pumping in commodities.

However, with the setting up of six multi-commodity exchanges in the country, retail investors can now

trade in commodity futures without having physical stock.

Commodities actually offer immense potential to become a separate asset class for market survey investors,

arbitrageurs and speculators. Retail investors, who claim to understand the equity markets, may find

commodities an unfathomable market.

But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail

investors should understand the risks and advantages of trading in commodities futures before taking a leap.

Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus

providing an efficient portfolio diversification option

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GOLD

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 gold’s total accumulated holdings relate to

“store of value” considerations.

Holdings in this category include the central Commodity Exchange reserves, private investments,

and high-cartage jewelry bought primarily in developing countries as a vehicle for savings. Thus,

gold is primarily a monetary asset. Less than one third of gold’s total accumulated holdings can

be considered a commodity, the jewelry bought in Western markets for adornment, and gold used

in industry.

Some analysts like to think of gold as a “currency without a country’. It is an internationally

recognized asset that is not dependent upon any government’s promise to pay. This is an

important feature when comparing gold to conventional diversifiers like T-bills or bonds, which

unlike gold, do have counter-party risk

Gold is a monetary metal whose price is determined by inflation, by fluctuations in the dollar and

U.S. stocks, by currency-related crises, interest rate volatility and international tensions, and by

increases or decreases in the prices of other commodities. The price of gold reacts to supply and

demand changes and can be influenced by consumer spending and overall levels of affluence.

Gold is different from other precious metals such as platinum, palladium and silver because the

demand for these precious metals arises principally from their industrial applications. Gold is

produced primarily for accumulation; other commodities are produced primarily for consumption.

Gold’s value does not arise from its usefulness in industrial or consumable applications. It arises

from its use and worldwide acceptance as a store of value. Gold is money.

Gold – An Investment Paradise

Gold has been synonymous to wealth and prosperity through the ages. The history of Gold dates back

to as early as 4000 BC when the prehistoric men used it as a tool. Since then Gold has filled the pages of

history as the divine metal that has attracted the attention of men –powerful and otherwise. Gold was the

source of power for the kings. Wars were waged; lives were lost as kingdoms piled up and hoarded tonnes of

Gold. In the modern history, Gold became the international currency as the Gold standard came into

existence. Even after the dismantling of Gold standard, Gold existed as the backbone of international trade

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and economics as the US accumulated tones of yellow metal. Till today, Gold has retained its basic use as a

commodity without losing its sheen as a currency.

Gold, because of its ability to protect the wealth of investors can be an ideal addition to a portfolio.

Also the short-term fluctuations in Gold offer good potential for trading. Gold has been on its long-term

upwards trajectory which began in early 2001. This long-term move has been punctuated by short-term

pullbacks offering opportunities for late entrants to join the bandwagon. With the US economy outgrowing

the league of developed nations during the last two years coupled with the worsening of long-term structural

weaknesses and the subsequent movements in the USD have moved the focus away from Gold’s use as a

commodity. However the long-term fundamentals of the yellow metal have also undergone a significant

change with the mining output falling quite steadily during the last decade coupled with an evergreen

demand especially from Asia.

This report analyses the long-term and short-term fundamental factors expected to move Gold prices. We

believe that the short-term weakness expected in gold is a great opportunity for the late-comers to join the

great Gold. Strategically, gold is one of the two most important commodities on the planet along with crude

oil. Gold has been historically recognized as the ultimate store of value and method of payment. The

following characteristics of Gold have enabled it play this role:

It is durable, homogenous and divisible

Gold’s rarity gives it intrinsic value and that value is high per unit of volume.

Its value is recognized across the globe and is traded in a continuous market.

Gold is the only financial medium of exchange that is not someone else’s liability.

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In updating our price outlook, we have considered the following factors:

Investment demand will continue to be the prime driver for the rally in Gold prices,

As economic factors will make gold more attractive compared to other financial assets.

Furthermore strong buying support from the Central Banks of Russia, China and

Middle East countries will help support the rally in Gold prices.

Mine production will not be able to meet current demand due to lack of new

Discoveries.

The long term average in the Crude/Gold ratio has been around 16 times, but is

Currently only around 10 times.

In the remaining part of this report we will consider the major factors that are likely to drive Gold prices

higher in the near future.

Basic Descriptive terms:

Investment:

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The money you earn is partly spent and the rest saved for meeting future Expenses. Instead of

keeping the savings idle, you may like to use savings in Order to get return on it in the future. This is called

Investment.

Reasons for investment:

One needs to invest to:

Earn return on your idle resources

Generate a specified sum of money for a specific goal in life

Make a provision for an uncertain future

It is also to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost

of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to

lose value because it will not buy the same amount of a good or a service in the future, as it does now or did

in the past. This is why it is important to consider inflation as a factor in any long-term investment strategy.

The aim of investments should be to provide a return above the inflation rate to ensure that the investment

does not decrease in value.

Right time for investment:

The sooner one starts investing the better. By investing early we allow our Investments more time to grow,

whereby the concept of compounding increases your income, by accumulating the principal and the interest

or dividend earned on it, year after year. The three golden rules for all investors are:

Invest early

Invest regularly

Invest for long term and not short term

Various options available for investment:-

One may invest in:

Physical assets like real estate, gold/jewellery, commodities etc.

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Financial assets such as fixed deposits with banks, small saving instruments with post offices,

insurance/provident/pension fund etc. or securities market related instruments like shares, bonds,

debentures etc.

WHAT MAKES GOLD SPECIAL?

Timeless and Very Timely Investment:

For thousands of years, gold has been prized for its rarity, its beauty, and above all, for its

unique characteristics as a store of value. Nations may rise and fall, currencies come and go, but

gold endures. In today’s uncertain climate, many investors turn to gold because it is an important

and secure asset that can be tapped at any time, under virtually any circumstances. But there is

another side to gold that is equally important, and that is its day-to-day performance as a

stabilizing influence for investment portfolios.

Gold is an effective diversifier:

Diversification helps protect your portfolio against fluctuations in the value of any one-

asset class. Gold is an ideal diversifier, because the 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 the ideal gift:

In many cultures, gold serves as a family treasure or a wealth transfer vehicle that is

passed on from generation to generation. Gold bullion coins make excellent gifts for birthdays,

graduations, weddings, holidays and other occasions.

They are appreciated as much for their intrinsic value as for their mystical appeal and beauty. And

because gold is available in a wide range of sizes and denominations, you don’t need to be

wealthy to give the gift of gold

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Gold is highly liquid:

Gold can be readily bought or sold 24 hours a day, in large denominations and at narrow

spreads. This cannot be said of most other investments, including stocks of the world’s largest

corporations. Gold is also more liquid than many alternative assets such as venture capital, real

estate, and timberland. Gold proved to be the most effective means of raising cash during the

1987 stock market crash, and again during the 1997/98 Asian debt crisis. So holding a portion of

your portfolio in gold can be invaluable in moments when cash is essential, whether for margin

calls or other needs.

Gold responds when you need it most:

Recent independent studies have revealed that traditional diversifiers often fall during

times of market stress or instability. On these occasions, most asset classes (including traditional

diversifiers such as bonds and alternative assets) all move together in the same direction. There is

no “cushioning” effect of a diversified portfolio — leaving investors disappointed. However, a

small allocation of gold has been proven to significantly improve the consistency of portfolio

performance, during both stable and unstable financial periods. Greater consistency of

performance leads to a desirable outcome — an investor whose expectations are met.

THE REASON WHY INVESTORS OWN GOLD

There are six primary reasons why investors own gold: They may never be more relevant than

they are today.

1. As a hedge against inflation.

2. As a hedge against a declining dollar.

3. As a safe haven in times of geopolitical and financial market instability.

4. As a commodity, based on gold’s supply and demand fundamentals.

5. As a store of value.

6. As a portfolio diversifier.

1. HEDGE AGAINST INFLATION

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Gold is renowned as a hedge against inflation. The most consistent factor determining the price of

gold has been inflation - as inflation goes up, the price of gold goes up along with it. Since the

end of World War II, the five years in which U.S. inflation was at its highest were 1946, 1974,

1975, 1979, and 1980. During those five years, the average real return on stocks, as measured by

the Dow, was -12.33%; the average real return on gold was 130.4%.

Today, a number of factors are conspiring to create the perfect inflationary storm: extremely

simulative monetary policy, a major tax cut, a long term decline in the dollar, a spike in oil prices,

a huge trade deficit, and America’s status as the world’s biggest debtor nation. Almost across the

board, commodity prices are up despite the short-term absence of a weakening dollar which is

often viewed as the principal reason for stronger commodity prices.

2. GOLD - HEDGE AGAINST A DECLINING DOLLAR

Gold is bought and sold in U.S. dollars, so any decline in the value of the dollar causes the price

of gold to rise. The U.S. dollar is the world's reserve currency - the primary medium for

international transactions, the principal store of value for savings, the currency in which the worth

of commodities and equities are calculated, and the currency primarily held as reserves by the

world's central Commodity Exchanges. However, now that it has been stripped of its gold

backing, the dollar is nothing more than a fancy piece of paper.

3. GOLD AS A SAFE HAVEN

Despite the fact that the United States is the worlds only remaining superpower, there are many

problems festering around the world, any one of which could explode with little warning. Gold

has often been called the "crisis commodity" because it tends to outperform other investments

during periods of world tensions.

The very same factors that cause other investments to suffer cause the price of gold to rise. A bad

economy can sink poorly run Commodity Exchanges. Bad Commodity Exchanges can sink an

entire economy. And, perhaps most importantly to the rest of the world, the integration of the

global economy has made it possible for Commodity Exchanging and economic failures to

destabilize the world economy.

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4. GOLD - SUPPLY AND DEMAND

First, demand is outpacing supply across the board. Gold production is declining; copper

production is declining; the production of lead and other metals is declining. It is very difficult to

open new mines when the whole process takes about seven years on average, making it hard to

address the supply issue quickly. Gold output in South Africa, the world's largest gold producer,

fell to its lowest level since 1931 this past year as the rand's gains prompted Harmony Gold

Mining Co. and rivals to close mines despite 16 year highs in the gold price.

5. GOLD – STORE OF VALUE

Economist Stephen Harmston of Bannock Consulting had this to say in a 1998 report for

the World Gold Council,

“…although the gold price may fluctuate, over the very long run gold has consistently reverted to

its historic purchasing power parity against other commodities and intermediate products.

Historically, gold has proved to be an effective preserver of wealth. It has also proved to be a safe haven

in times of economic and social instability. It sometimes takes a period of falling stock prices and market

turmoil to focus the mind on the fact that it may be important to invest part of one’s portfolio in an asset

that will, at least, hold its value.”

6. GOLD - PORTFOLIO DIVERSIFIER

The most effective way to diversify your portfolio and protect the wealth created in the stock and

financial markets is to invest in assets that are negatively correlated with those markets. Gold is

the ideal diversifier for a stock portfolio, simply because it is among the most negatively

correlated assets to stocks.

Investment advisors recognize that diversification of investments can improve overall portfolio

performance. The key to diversification is finding investments that are not closely correlated to

one another. Gold and other tangible assets have historically had a very low correlation to stocks

and bonds. Although the price of gold can be volatile in the short-term, gold has maintained its

value over the long-term, serving as a hedge against the erosion of the purchasing power of paper

money

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GOLD CONTRACTS

In India we have 4 types of gold contracts available in mcx.

Gold-1000 grams

Goldmini- 100 grams

Goldhni-1000 grams

Goldguinea-8 grams

Gold -1000 grams

It is a 1000 grams lot available in mcx and big investor can invest in this gold lots.

Gold hni-1000 grams

It is a1000 grams lot available in mcx so, here who has registered as a HNI in mcx he will take the gold

HNI contracts at a time .number of contracts like it called as bulk Goldmini-100 grams

The medium investor can invest in goldmine and the lot size is 100 grams.

Goldguinea-8 grams

It is especially for small investors the lot size is 8 grams deals.

WORLD GOLD MARKETS

London as the great clearing house

New York as the home of futures trading

Zurich as a physical timetable

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.

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24 HOURS ROUND THE CLOCK MARKET

Hong Kong gold market

Zurich Gold Market

London Gold Market

New York Market

INDIA GOLD MARKET

Gold is valued in India as a savings and investment vehicle and is the second preferred investment

after Commodity Exchange deposits

India is the world’s largest consumer of gold to jewellery as investment.

In July “1997 the RBI authorized the commercial Commodity Exchanges to import gold for sale or

loan to jewelers and exporters. At present, 13 Commodity Exchanges 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.

The gold hoarding tendency is well ingrained in Indian society.

Domestic consumption is dictated by monsoon/harvest and marriage season. Indian jewelry off take

is sensitive to price increase 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.

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THE PURITY OF GOLD ARTICLES IS GENERALLY DESCRIBED IN SIX WAYS.

Percent % (Parts of gold per

100)

Fineness (Parts of gold per

1000)

Karats (parts of gold per 24)

100% 999 Fine 24 Karats

91.60% 916 Fine 22 Karats

75.00% 750 Fine 18 Karats

58.50% 583 Fine 14 Karats

41.60% 416 Fine 10 Karats

FINE GOLD CONTENT

The minimum fineness is 995 parts per 1000 fine gold and gold said to be 100 fine is marked down

to 999.9 fine. The following fine gold contents of other bar weights are accepted by the London Bullion

Market Association (LBMA). These bars are available at the spot Loco-London price plus a premium which

varies dependent on prevailing market conditions in different locations.

FUNDAMENTAL ANALYSIS

At the most basic level, by looking at the balance sheet, cash flow statement and income statement, a

fundamental analyst tries to determine a company’s value. In financial terms, an analyst attempts to measure

a company’s intrinsic value. In this approach, investment decisions are fairly easy to make –if the price of a

stock trades below its intrinsic value, it’s a good investment. Although this is an oversimplification

(fundamental analysis goes beyond just the financial statements) for the purpose of this tutorial, this simple

tenet holds true.

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TECHNICAL ANALYSIS

Technical traders, on the other hand, believe there is no reason to analyze a company’s fundamental

because these are all accounted for in the stock’s price. Technicians believe that all the information they

need about a stock can be found in its chart. While a fundamental analyst starts with the financial statements.

TYPES OF MOVING AVERAGES

There are a number of different types of moving averages that vary in the way they are calculate, but

how each average is interpreted remains the same. The calculations only differ in regards to the weighting

that they place on the price data, shifting from equal weighting of each price point to more weight being

placed on recent data .The six most common types of moving averages are

SIMPLE MOVING AVERAGE (SMA)

This is the most common method used to calculate the moving average of price. It simply takes the sum of

all of the past closing prices over the time period and divides the result by the number of price used in the

calculation. For example, in a 10-day moving average, the last 10 closing are added together and then

divided by 10.

LINEAR WEIGHTED AVERAGE

Taking the sum of all the closing prices over a certain time period and multiplying them by the

position of the data point and then dividing by the sum of the number of periods calculate the linear

weighted moving average. For example, in a five –day linear weighted average, five multiplies today’s

closing price, yesterdays by four and so on until the first day in the period range is reached.

EXPONENTIAL MOVING AVERAGE (EMA) :

This moving average calculation uses a smoothing factor to place a higher weight on recent data

point and is regarded as much more efficient than the linear weighted average. Having an understanding of

the calculation is not generally required for most trades because most charting packages do the calculation

for you. The most important thing to remember about the exponential moving average is that it is more

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responsive to new information relative to the simple moving average. This responsiveness is one of the key

factors of why this is the moving average of choice among many technical traders.

For each months contract, descriptive statistics is calculated, this descriptive statistics shows the Mean, Median, Standard Deviation (S.D), and Skewness

. Standard Deviation (volatility):

A statistical term that provides a good indication of volatility. It measures how widely values (closing

prices for instance) are dispersed from the average. The larger the difference between the closing prices

and the average prices, the higher the standard deviation will be and the higher the volatility. The closer

the closing prices are to the average price, the lower the standard deviation and the lower the volatility.

Skewness:

Skewness is a measure of symmetry. A data set, or distribution, is symmetric if it has a similar shape to

the left and right of a centre point. The skewness of a normal distribution is zero. Negative values for the

skewness indicate that observations are skewed leftwards, or that the left tail is heavier than the right

tail. Positive skewness, on the other hand, indicates more upward spikes (episodes of rising prices) than

negative ones.

THE POSSIBLE EVENTS THAT COULD DRIVE DOWN THE GOLD PRICE SEEM HIGHLY UNLIKELY.

India could slow its consumption

The U.S stock market could boom, taking the attention away from gold

Peace could break out in the world

There could be a huge gold discovery

Oil prices could collapse

The dollar could rise

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NEED AND IMPORTANCE OF THE STUDY

The era of liberalization has revolutionized the commodity market.

In such a scenario it is necessary to make an assessment of commodity market as more and more

investors are seeking commodity market as of the important investment avenues.

It is necessary to make a detailed analysis.such an analysis will help any person who is to invest in

commodity market.

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SCOPE OF THE STUDY

The analysis is based on commodity trading specifically in gold futures market.

The analysis is based on six (6) month prices on daily basis to show the friend of the bullion market.

The analysis is based on opening and closing price of gold in commodity market.

The study is conducted based on four types of gold products i.e.

Gold

Gold HNI

Gold guinea and

Gold mini only

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OBJECTIVES OF THE STUDY

To study the commodities trading and its clearing settlements

To study the commodity trading with reference to gold.

To analyze the gold trend in commodity market

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LIMITATIONS

A technical analysis is done using 3day moving averages.

The present study takes in to consideration of 3 month data of gold prices.

This analysis will be holding good for a limited time period i.e. based on present scenario and

study conducted, future movement of price may or may not be similar.

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CHAPTER – II

REVIEW OF LITERATURE

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REVIEW OF LITERATURE

The trading in commodities was started with the first transaction that took place between two

individuals. We can relate this to the ancient method of trading i.e., BARTER SYSTEM. This method

faced the initial hiccups due to the problems like: store of value, medium of exchange, deferred

payment, measure of wealth etc. This led to the invention of MONEY. As the market started to expand,

the problem of scarcity piled up.

The farmers / traders then felt the need to protect themselves against the fluctuations in the price for their

produce. In the ancient times, the commodities traded were – the Agricultural Produce, which was exposed

to higher risk i.e., the natural calamities and had to face the price uncertainty. It was certain that during the

scarcity, the farmer realized higher prices and during the oversupply he had to loose his profitability. On the

other hand, the trader had to pay higher price during the scarcity and vice versa. It was at this time that both

joined hands and entered into a contract for the trade i.e., delivery of the produce after the harvest, for a price

decided earlier. By this both had reduced the future uncertainty.

The damage to current account from net import of gold ($161 billion) and oil ($515 billion) seems far

less. Besides disrupting the current account, capital goods import has sent the nation’s growth into ICU (See

‘The elephant experts didn’t see, Business Line, September 5, 2013). How is it then gold is demonised as

the sole villain? Because modern economics brands gold a “barbaric relic”.

Double trouble

Modern economists and the Indian people seem to operate on two different paradigms with regard to gold. In

the modern West, gold is more a state asset than a private possession. Gold constitutes just three per cent of

family wealth there, but a third in India. Western states, socialist or capitalist, expropriated all private gold

during the last century. Even the liberal US outlawed private gold in 1936 and built official gold reserve of

over 20,000 tonnes by 1950.

Modern economics views gold as an uneconomic, wasteful, private investment. But traditionally, in

India, gold has been the preferred asset of the rural masses who hold 70 per cent of the nation’s stocks.

Indian gold habits clearly mock at modern economic theories.

Market Oracle, a UK-based market analysis and forecasting online publication, captures the

relation between India and gold thus: Indians own 20,000 tonnes of gold worth $1 trillion — almost half of

India's GDP. For Indians, gold is not just money or asset; it ensures the financial security and stability of

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families. It has religious overtones. More than a commodity or money, it is integral to the warp and weft of

family life. Investments in gold and jewellery are indistinguishable. Jewellery is the working capital of

families; families collateralise it for commercial borrowing.

Some 13 per cent of Indian families, more from rural areas, borrow against gold as collateral; while rural

India borrows from the unorganised financial sector, urbanites access bank loans. The authors of Market

Oracle seem to understand India’s family-gold nexus better than Indian policymakers. Yet, despite such a

paradigmatic difference, economic laws on gold based on the Western experience are continuously being

tried out in India. Result: the establishment hates what the people love.

Signs of re think

However, there are indications of rethinking now. Echoing the Market Oracle logic, the Reserve

Bank of India Working Group to Study the Issues Related to Gold Imports and Gold Loans by non-bank

financial companies under K. U. B. Rao (January 2013) says that “demand for gold appears to be

autonomous and a function of several influences and factors that may not be strictly amenable to policy

changes” — an admission that gold demand ducks economic theories and policies.

Again, says the study, “gold demand is price inelastic” — meaning gold buying does not reduce if

prices rise. It warns that if the official supply of gold is restricted by import curbs or extra taxes, “the buyers

take recourse to unauthorised channels to buy gold”.

Now, recall that India had banned gold imports for almost four decades till the early 1990s. But

smugglers ensured an unfailing supply. Result: the gold economy functioned underground, generated black

money and, in turn, was funded by black money. The Government’s dislike for gold did not make Indians

love gold less.

Keeping the the bitter past in mind, the RBI working group sensibly acknowledges that it is

impractical to restrict the import of gold. Does it not mean then that the UPA government’s present measures

to make gold imports costly would only make smuggling gainful? If the Dawood gang can land deadly

explosives on Nariman Point with ease, will it find it tougher to bring in gold?

Hoodwinked

But, are Indians fools to have invested in gold as the economists would have us believe? No.

Actually, gold seems to have fooled the economists. The RBI working group study finds that gold has

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outperformed stocks and bank deposits in the last five years — more than three times over Nifty, six times

over bank deposits and 10-year government bonds. Only gold, no other asset, has so consistently beaten

inflation.

The average inflation during 2001-02 to 2005-06 was 4.7 per cent but gold yielded 9.2 per cent —

almost double. The average inflation for 2006-7 to 2010-11 was 6.7 per cent but the yield on gold was 23.7

per cent — three times plus. Average inflation for 2012 is 9 per cent but gold returned 33.5 per cent —

almost four times. Traditional India intuitively seems to understand the value of gold.

Says Y. V. Reddy, a globally celebrated central banker: “The real purchaser of gold is typically a peasant.”

Close to 70 per cent of gold jewellery is sold in rural areas and most gold sales are by way of jewellery. To

quote, Jeffrey A. Franks “Holding gold has, in fact, often in history served, from France to India, as the

only way the peasant can protect himself against inflation and the vicissitudes of politics”.

Finally, while trillion dollar gold is the real asset of the Indian masses, the trillion dollar stock market

capitalisation is the phoney wealth of the Indian classes, dependent on the QE announcements of Ben

Bernanke.

Commodities Futures’ trading in India has a long history. The first commodity futures market

appeared in 1875. But the new standardized form of trading in the Indian capital market is an attractive

package for all the people who earn money through speculation by trading into FUTURES. It is a well-

known fact and should be remembered that the trading in commodities through futures’ exchanges is

merely, “old wine in a new bottle”.

What is “Commodity”?

Any product that can be used for commerce or an article of commerce which is traded on an authorized

commodity exchange is known as commodity. The article should be movable of value, something which is

bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all

kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines “goods” as “every kind of

movable property other than actionable claims, money and securities”.

“The term refers to a whole range of natural resources that are used to create the goods that people buy and

the food they eat.” Says Jeremy Baker, USB's Zurich-based head of Commodity Research'.

A commodity may be defined as an article, a product or material that is bought and sold. It can be

classified as every kind of movable property, except Actionable Claims, Money & Securities. Commodities

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actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs

and speculators.

Retail investors, who claim to understand the equity markets, may find commodities an unfathomable

market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned.

Retail investors should understand the, risks and advantages of trading in commodities futures before taking

a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds,

thus providing an efficient portfolio diversification option.

What is a commodity Market?

Commodity market is a place where trading in commodities takes place. Markets where raw or primary

products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which

they are bought and sold in standardized Contracts. It is similar to an Equity market, but instead of buying or

selling shares one buys or sells commodities.

Commodity market is an important constituent of the financial markets of any country. It is the market

where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities

like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market.

This would help investors hedge their commodity risk, take speculative positions in commodities and exploit

arbitrage opportunities in the market.

In fact, the size of the commodities markets in India is also quite significant. Of the country's GDP of

Rs 13, 20,730 crores (Rs 13,207.3 billion), commodities related (and dependent) industries constitute about

58 per cent. Currently, the various commodities across the country clock an annual turnover of Rs 1, 40,000

crores (Rs 1,400 billion). With the introduction of futures trading, the size of the commodities market grows

many folds here on.

In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin

are allowed for commodity trading recognized under the FCRA. The national commodity exchanges,

recognized by the Central Government, permits commodities which include precious (gold and silver) and

non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and

jute goods, sugar and guar, potatoes and onions, coffee and tea, rubber and spices. Etc.

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History of Evolution of commodity markets

Historically, dating from ancient Sumerian use of sheep or goats, or other peoples using pigs, rare

seashells, or other items as commodity money, people have sought ways to standardize and trade contracts in

the delivery of such items, to render trade itself more smooth and predictable.

Someone else’s lower offer. That keeps the market as efficient as possible, and keeps the traders on

their toes to make sure no one gets the purchase or sale before they do.

INTERNATIONAL COMMODITIES EXCHANGES

Chicago board of trade (CBOT) – 1848

London metal exchange (LME) – 1877

London international financial futures exchange (LIFFE) – 1979

Tokyo commodity exchange (TOCOM) – 1984

Shanghai metal exchange (SHME)

Dahlia commodity exchange (DCE) – 1993

PARTICIPANTS OF COMMODITY MARKET

Hedgers

Hedging involves buying or selling of a standardized futures contract against the corresponding sale

or purchase respectively of the equivalent physical commodity. The benefits of hedging flow from the

relationship between the prices of contracts (either ready or forward) for physical delivery and those of

futures contracts. So long as these two sets of prices move in close unison and display a parallel (or closely

parallel) relationship, losses in the physical market are offset, either fully or substantially, by the gains in the

futures market. Hedging thus performs the economic function of helping to reduce significantly, if not

eliminate altogether, the losses emanating from the price risks in commodities.

Hedgers are often businesses, or individuals, who at one point or another deal in the underlying cash

commodity. Take an example: A Hedger pay more to the farmer or dealer of a produce if its prices go up.

25

For protection against higher prices of the produce, he hedges the risk exposure by buying enough future

contracts of the produce to cover the amount of produce he expects to buy. Since cash and futures prices do

tend to move in tandem, the futures position will profit if the price of the produce raises enough to offset

cash loss on the produce.

Speculators

Speculators are some what like a middle man. They are never interested in actual owing the

commodity. They will just buy from one end and sell it to the other in anticipation of future price

movements. They actually bet on the future movement in the price of an asset. They are the second major

group of futures players. These participants include independent floor traders and investors. They handle

trades for their personal clients or brokerage firms. Buying a futures contract in anticipation of price

increases is known as ‘going long’. Selling a futures contract in anticipation of a price decrease is known as

‘going short’. Speculative participation in futures trading has increased with the availability of alternative

methods of participation.

Speculators have certain advantages over other investments they are as follows:

If the trader’s judgment is good, he can make more money in the futures market faster because prices

tend, on average, to change more quickly than real estate or stock prices. Futures are highly leveraged

investments. The trader puts up a small fraction of the value of the underlying contract as margin, yet he can

ride on the full value of the contract as it moves up and down.

Arbitrators

According to dictionary definition, a person who has been officially chosen to make a decision

between two people or groups who do not agree is known as Arbitrator. In commodity market Arbitrators

are the people who take the advantage of a discrepancy between prices in two different markets. If he finds

future prices of a commodity edging out with the cash price, he will take offsetting positions in both the

markets to lock in a profit. Moreover the commodity futures investor is not charged interest on the difference

between margin and the full contract value.

DERIVATIVES

Another major leap in the development of commodities markets is the growth in commodities derivative

segment. Derivatives trading has a long history. The first recorded incident of commodities trade was

26

traced back to the times of ancient Greece. In the year 1688 De la Vega reported the trading in 'time

bargains' which were the then commonly used terms for options and futures.

Meaning of Derivatives:

A derivative is a product whose value is derived from the value of one or more underlying variables or

assets in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset.

TYPES OF DERIVATIVE CONTRACTS

The following are the various types of derivatives. They are

FORWARD CONTRACT

A forward contract is a customized contract between two entities, where settlement takes place on a specific date

in the future at today’s pre-agreed price.

FUTURE CONTRACT

A futures contract is an agreement between two parties to buy or sell an asset in a certain time at a certain price;

they are standardized and traded on exchange.

OPTIONS

Options are of two types-call option and put option. Calls give the buyer the right but not the obligation to buy a

given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the

right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given

date.

WARRANTS

Options generally have lives of up to one year; the majority of options traded on options exchanges having a

maximum maturity of nine months. Longer-dated options are called warrants and are generally traded over-the

counter.

27

LEAPS

The acronym LEAPS means long-term Equity Anticipation securities. These are options having a maturity of up

to Six years.

BASKETS

Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average of

a basket of assets. Equity index options are a form of basket options.

SWAPS

Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged

formula. They can be regarded as portfolios of forward contracts. The two commonly used Swaps are Interest rate

and currency swaps.

INTEREST RATE

These entail swapping only the related cash flows between the parties in the same currency.

Currency Swaps

These entail swapping both principal and interest between the parties, with the cash flows in on direction being in

a different currency than those in the opposite direction.

SWAPTION

Swaptions are options to buy or sell a swap that will become operative at the expiry of the options.Thus a

swaption is an option on a forward swap

28

COMMODITY EXCHANGES REGISTERED IN INDIA

Commodity Exchange Products Traded

Bhatinda Om & Oil Exchange Ltd., Gur

The Bombay commodity Exchange Ltd

Sunflower Oil

Cotton ( Seed and Oil)

Safflower ( Seed , Oil and Oil Cake)

Groundnut ( Nut and Oil)

Castor Oil, Castor seed

Sesamum ( Oil and Oilcake)

Rice bran, rice bran oil and oil cake

Crude palm oil

The Rajkot Seeds Oil & Bullion Merchants Association Ltd.

Groundnut Oil, Castro Seed

The Kanpur Commodity Exchange Ltd., Rapeseed / Mustard seed oil and cake.

Te Meeerut Agro commodities Exchange Co., Ltd. Gur

The Spices and Oilseeds exchange Ltd., Sangli Turmeric

Ahmedabad Commodities Exchange Ltd Cottonseed, castor seed

Vijay Beopar Chamber Ltd., Muzaffarnagr Gur

India Pepper & Spice Trade Association, Kochi Pepper

Rajadhani Oils and Oil seeds Exchange Ltd.,Delhi Gur, Rapeseed / Mustard Seed Sugar Grade – M

Rapeseed / Mustard Seed / Oil / Cake

29

National Board of Trade, Indore

Soyabean / Meal / Oil / Crude Palm Oil

The Chamber of Commerce, Hapur Gur, Rapeseed / Mustard seed

The East India Cotton Association, Mumbai Cotton

The central India Commercial Exchange Ltd Gwaliar Gur

The east India Jute & Hessain Exchange Ltd., Kolkata Hessain, Sacking

First Commodity Exchange of India Ltd., Kochi Copra, Coconut Oil & Copra Cake

30

How to invest in a Commodity Market?

With whom investor can transact a business?

An investor can transact a business with the approved clearing member of previously mentioned Commodity

Exchanges. The investor can ask for the details from the Commodity Exchanges about the list of approved

members.

What is Identity Proof?

When investor approaches Clearing Member, the member will ask for identity proof. For which Xerox copy

of any one of the following can be given

a) PAN card Number

b) Driving License

c) Vote ID

d) Passport

What statements should be given for Commodity Exchange Proof?

The front page of Commodity Exchange Pass Book and a canceled cheque of a concerned Commodity

Exchange. Otherwise the Commodity Exchange Statement containing details can be given.

What are the particulars to be given for address proof?

In order to ascertain the address of investor, the clearing member will insist on Xerox copy of Ration card or

the Pass Book/ Commodity Exchange Statement where the address of investor is given.

What are the other forms to be signed by the investor?

The clearing member will ask the client to sign

a) Know your client form

b) Risk Discloser Document

31

The above things are only procedure in character and the risk involved and only after understanding the

business, he wants to transact business.

What aspects should be considered while selecting a commodity broker?

While selecting a commodity broker investor should ideally keep certain aspects in mind to ensure that they

are not being missed in any which way. These factors include

Net worth of the broker of brokerage firm.

The clientele.

The number of franchises/branches.

The market credibility.

The references.

The kind of service provided- back office functioning being most important.

Credit facility.

Broker:-

The Broker is essentially a person of firm that liaisons between individual traders and the commodity

exchange. In other words the Commodity Broker is the member of Commodity Exchange, having direct

connection with the exchange to carry out all trades legally. He is also known as the authorized dealer.

How to become a Commodity Trader/Broker of Commodity Exchange?

To become a commodity trader one needs to complete certain legal and binding obligations. There is routine

process followed, which is stated by a unit of Government that lays down the laws and acts with regards to

commodity trading. A broker of Commodities is also required to meet certain obligations to gain such a

membership in exchange. To become a member of Commodity Exchange the broker of brokerage firm

should have net worth amounting to Rs. 50 Lakhs. This sum has been determined by Multi Commodity

Exchange.

32

How to become a Member of Commodity Exchange?

To become member of Commodity Exchange the person should comply with the following Eligibility

Criteria.

1. He should be Citizen of India.

2. He should have completed 21 years of his age.

3. He should be Graduate or having equivalent qualification.

4. He should not be Commodity Exchangerupt.

5. He has not been debarred from trading in Commodities by statutory/regulatory authority,

The commodities Depository account may be credited in the following situations:

1. Demat

2. Revalidation

3. Actual purchase from market.

Entities involved in the DEMAT process

Issuer: The issuer is an entity, which floats the physical paper document. It would be a company in case

of the share certificate or warehouse in case of warehouse receipt.

The Registrar and Transfer Agents: It acts on behalf of the issuer as an interface between the issuer

and the depository for converting the physical warehouse receipt in the demat form.

The Depository: The Depository maintains the records of the beneficial owner in its books. Presently

there are two depositories in India i.e. National Securities Depository Limited (NSDL) and Central

Depository Services Limited (CDSL)

33

Types of Demat Account

Beneficiary Owner Account is used to hold and transact in commodity balances. The depositor is

required to quote this account number at the time of depositing commodity in the warehouse. The

commodity balances are credited in this type of account. All the investors trading in the commodity markets

are required to separately open beneficiary owner account for commodity. The existing demat account for

securities cannot be used for the purpose of holding and transacting in the commodity. Unlike the securities

demat account, the investors need to open the commodity demat account with both the depositories i.e.

NSDL and CDSL. The basic reason behind opening the account in both the depositories is that the

Depositories have not yet started Inter-Depository transfer in case of commodities.

Clearing Member Pool Account is used for the purpose of settlement of delivery obligation. The

account is used by the member for giving or receiving delivery of commodity to or from the Clearing House

of the Exchange. In short the pay-in and pay-out of the exchange is settled through this account. All the

members of the exchange are required to open the CM Pool Account with both the depositories. This cannot

be used for holding the commodity.

Concept of International Commodity Identification Number (ICIN)

ICIN refers to International Commodity Identification Number. Commodities that have been dematerialized

are identified by its unique code (i.e. ICIN) allotted by depository.

ICIN is generated on the uniqueness of the following 4 parameters:

Commodity.

Warehouse Location.

Grade / Fineness of the commodity.

Validity date of the commodity.

guarantees demanded by the participants.

34

RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. Once can also define research as a

Scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of

scientific investigation.

Research is an academic activity and as such the term should be used in a technical sense. According to

CLIFFORD WOODY research comprises defining and redefining problems, formulating hypothesis or

suggested solutions; collecting, organizing and evaluating data; making deductions and reaching

conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating

hypothesis.

Collecting the data: In dealing with any real life problem it is often found that data at hand are

inadequate, and hence, it becomes necessary to collect data that are appropriate. There are several ways of

collecting the appropriate data which differ considerably in context of money costs, time and other resources

at the disposal of the researcher.

RESEARCH DESIGN

This research deals with the descriptive research. The major purpose of descriptive research is to find out

state affairs, as it exists at present. Descriptive research studies are concerned with describing the

characteristics of a particular individual or group.

35

SOURCES OF DATA

The data is collected from secondary sources mainly from financial websites

Primary source of data: - no primarily source of data is used.

Secondary source of data: - The secondary data is collected from Hyderabad inter connected stock

exchange and various internet sources

Secondary data is already collected data which may be a publications, company refunds, websites, books,

journals, annual reports etc…,

STATISTICAL TOOLS

The most common method used to calculate the moving average of price.

It simply takes the sum of all of the past closing prices over the time period and divides the result by

the number of price used in the calculation.

For example, in a 10-day moving average, the last 10 closing are added together and then divided by

10

36

CHAPTER 3

COMPANY PROFILE

37

COMPANY PROFILE

Apex Technology was started in March 2002 as a corporate financial house. It is a comprehensive

investment Commodity Exchange that comes with years of expertise in offering solutions and advisory

services across the corporate world. Apex Technology’s investment management group is responsible for

managing assets on a discretionary basis across retail, high net worth and corporate clients. Apex

Technology Capital Advisors. Is registered as a portfolio manager with the securities and exchange board of

India. On this platform Apex Technology has created distinct investment strategies to suit a wide variety of

client goals and risk preferences that are able to constitute core elements of most asset allocation strategies.

These strategies encompass most of the liquid asset classes including equities, mutual funds fixed income

and precious metals among others. Apex Technology is in the business of managing the assets of individuals

and corporate. The collective experience at doing so dates back several decades and the team is rated to be

amongst the best wealth managers in India today. This bares testimony in the fact that the organization’s

ever growing list of corporate clients includes senior and middle management from organizations that

include Intel, IBM, HP, Coke, Pepsi, Whirlpool Corporation, Hindustan levers, 3M, Gillette and Cisco.

At Apex Technology, there is the realization that every one of its clients has a distinct financial goal

broken down into unique needs, a distinct investment history, a defined propensity to save and finally a

varying appetite at being exposed to investment risks.

Apex Technology’s approach at managing the wealth of its clients is built on the foundation that

every one of its financial advisors is a custodian of its client’s wealth.

NATURE OF BUSINESS

Apex Technology neither ‘sells’ financial products nor does it lay pre-conditions to investing. Its fee based

advisory services ensures that it adopts a consultative approach to managing wealth. Advice therefore, is

independent and client centric.

Apex Technology’s service offering is perhaps the widest in the industry. The scope of its services

encompasses the entire spectrum of financial needs of an individual right.

38

Apex Technology’s services are broadly classified into:

Capital Markets advisory service and Corporate Finance Services including equity and debt

placement, debt restructuring and Mergers & Acquisitions.

Investment Advisory Services covering retail and corporate investment and wealth management

services, Portfolio Management Services, Secondary market execution services and Insurance

Advisory Services.

Asset Management that involves building an INR 1 Billion restructuring fund.

Vision:

To make Apex Technology Capital Pvt Ltd the dominant pension’s player built on trust by world

class people and services.

This we hope to achieve by:

Understanding the need of the customers & offering them superior products & services.

Leveraging the technology to service customers quickly, efficiently & conveniently.

Developing & implanting superior risk management & investment strategies.

Providing an enabling environment to faster growth & learning for our employees.

Building transparencies in all dealings.

The success of the company will be founded in its unflinching commitment to five core value-

integrity, customer first, boundary less, ownership & passion.

Mission:

39

Apex Technology Capital Advisors launched with the mission “to be the prominent destination for

personalized financial solutions helping individuals creating wealth”.

Objectives of the organization:

The ability to leverage the resources of strategic partners & other providers of expert services.

Carefully managing business growth to avoid disruption to existing client’s relationship & ensure

that the infrastructure is in place to support new relationships & service expectations.

Developing broad & deep relationships with all clients, managing as much of financial life as

possible &

Taking advantage of product & service developments to bring the very best to the clients.

SERVICES STRATEGIES

Client Referral Programs

Client referrals are the most reliable and most cost-effective source of new clients. We help firms

maximize their success by creating process and tools that make generating client a referrals a natural

and systematic part of the practice.

Centres of Influence Referrals Programs

Developing relationships with other professional advisors can generate referrals for new clients. We help

firms create strategies to meet these professionals, nature the relationships and develop tools to encourage

referrals.

Client Retention Programs

Maintaining and leveraging existing client relationships is far less expensive and more productive than

trying to acquire new clients. We help organizations develop effective client communication programs that

build stronger client relationships, encourage referrals, and produce incremental business.

New Client Acquisition Programs

40

A diverse mix of campaigns including events, public relations, advertising and direct marketing can be an

effective means of acquiring new clients. We help firms create and implement integrated marketing

strategies to reach their goals.

Branches:

Apex Technology Capital Pvt. Ltd currently has over 19 branches and distributions are present in

over 37 locations across India. Bangalore, Delhi, Mumbai branches are for corporate financing and

Commodity Exchange and rest of the branches are for Commodity Exchange only. We manage around 4000

clients with the total AUM (Assets under Management) of over 5bn. We have plans to open another 5

locations in the next year or so. Our largest practice is in Bangalore with about 25 relationship managers in

the wealth management and 2 in the HNI team. Overall, across the company, we have 200 employees who

directly involved with wealth management. Apex Technology probably have the best client to relationship,

this ratio varies between 20 and 50. Our client retention rate is close to 90%, which is pretty remarkable,

given the fact that there are so many players in the market.

APEX TECHNOLOGY NETWORK

Apex Technology presence in 19 locations

200+ professionals

Distribution presence in 37 locations

Investment management centralized in Bangalore

Apex Technology was the envisioned to be a full service Investment Commodity Exchange with over

INR 6500 crores of transactions that we have been involved with, INR 500 crores of AUM that Apex

Technology manage, the 37 locations that its present in and the 4000 clients that it have which are

considered to be amongst the leading investment Commodity Exchanges in the country.

SCOPE OF APEX TECHNOLOGY:

41

INVESTMENT COMMODITY EXCHANGEING

Our investment Commodity Exchange expertise ranges across domestic and cross border mergers &

acquisitions, capital raising, debt restructuring and Initial Public Offerings. Apex Technology's global, cross-

industry expertise and our strong associations with financial institutions, venture capitalists and industry

leaders, positions us to offer comprehensive advisory expertise to Indian corporations seeking to grow in

domestic and international markets.

42

OBJECTIVES OF APEX TECHNOLOGY

Create a single integrated national level solution with access to multiple markets for providing high cost-

effective service to millions of investors across the country.

Create a liquid and vibrant national level market for all listed companies in general and small capital

companies in particular.

Optimally utilize the existing infrastructure and other resources of participating Stock Exchanges, which

are under-utilized now.

Provide a level playing field to small Traders and Dealers by offering an opportunity to participate in a

national markets having investment-oriented business.

Provide clearing and settlement facilities to the Traders and Dealers across the Country at their doorstep

in a decentralized mode.

43

CHAPTER – 4

DATA ANALYSIS AND INTERPRETATIONS

44

TABLE-4.1

Gold-1000 grams

The below table shows 3 MONTHS moving averages.

Date Close(Rs)3 MONTHS MOVING AVERAGE

1-Jan-12 16747 0

2-Jan-12 16794 0

4-Jan-12 16889 16810

5-Jan-12 16897 16860

6-Jan-12 16923 16903

7-Jan-12 16888 16902.66667

8-Jan-12 16906 16905.66667

9-Jan-12 16957 16917

11-Jan-12 17092 16985

12-Jan-12 16929 16992.66667

13-Jan-12 16858 16959.66667

14-Jan-12 16957 16914.66667

15-Jan-12 16899 16904.66667

16-Jan-12 16912 16922.66667

45

18-Jan-12 16892 16901

19-Jan-12 16994 16932.66667

20-Jan-12 16756 16880.66667

21-Jan-12 16598 16782.66667

22-Jan-12 16519 16624.33333

23-Jan-12 16551 16556

25-Jan-12 16518 16529.33333

27-Jan-12 16503 16524

28-Jan-

12 16353 16458

29-Jan-12 16317 16391

30-Jan-12 16317 16329

1-Feb-12 16620 16418

2-Feb-12 16754 16563.66667

3-Feb-12 16647 16673.66667

4-Feb-12 16152 16517.66667

5-Feb-12 16106 16301.66667

6-Feb-12 16286 16181.33333

8-Feb-12 16276 16222.66667

46

9-Feb-12 16319 16293.66667

10-Feb-12 16277 16290.66667

11-Feb-12 16474 16356.66667

12-Feb-12 16452 16401

13-Feb-12 16503 16476.33333

15-Feb-12 16605 16520

16-Feb-12 16731 16613

17-Feb-12 16756 16697.33333

18-Feb-12 16775 16754

19-Feb-12 16857 16796

20-Feb-12 16816 16816

22-Feb-12 16692 16788.33333

23-Feb-12 16591 16699.66667

24-Feb-12 16488 16590.33333

25-Feb-12 16694 16591

26-Feb-12 16772 16651.33333

27-Feb-12 16789 16751.66667

1-Mar-12 16796 16785.66667

2-Mar-12 17020 16868.33333

47

3-Mar-12 17028 16948

4-Mar-12 16956 17001.33333

5-Mar-12 16901 16961.66667

6-Mar-12 16907 16921.33333

8-Mar-12 16739 16849

9-Mar-12 16727 16791

10-Mar-12 16484 16650

11-Mar-12 16526 16579

12-Mar-12 16447 16485.66667

13-Mar-12 16452 16475

15-Mar-12 16538 16479

16-Mar-12 16718 16569.33333

17-Mar-12 16687 16647.66667

18-Mar-12 16768 16724.33333

19-Mar-12 16509 16654.66667

20-Mar-12 16506 16594.33333

22-Mar-12 16416 16477

23-Mar-12 16445 16455.66667

24-Mar-12 16295 16385.33333

48

25-Mar-12 16261 16333.66667

26-Mar-12 16349 16301.66667

27-Mar-12 16390 16333.33333

29-Mar-12 16319 16352.66667

30-Mar-12 16291 16333.33333

31-Mar-12 16295 16301.66667

1-Apr-12 16391 16325.66667

3-Apr-12 16424 16370

5-Apr-12 16377 16397.33333

INTERPRETATION

As above data we are taken GOLD Price moving from January 1st to April 5th, on 1st January it is

closed on 16747 in between the period on Jan 11th it is closed to 17092, latterly on 29 th Jan it came down to

16317, on 2nd Feb. it is increased to 16754, on 5th Feb. again it is come down to 16106, end of the contract on

5th April it is closed to 16377.

If you see total data the gold is highly fluctuated because the gold leads the economy.

49

CHART-4.1

GOLD 3 MONTHS MOVING AVERAGE

The below graph shows daily prices like closing prices of the gold in the form of the technical tool

indicator simple moving averages.

50

TABLE-4.2

GOLDGUINEA 8 GRAMS

The below table shows 3 MONTHS moving averages.

Date Close(Rs) 3 MONTHS moving average

1-Feb-12 13183 0

2-Feb-12 13324 0

3-Feb-12 13258 13255

4-Feb-12 12896 13159.33333

5-Feb-12 12846 13000

6-Feb-12 12998 12913.33333

8-Feb-12 12976 12940

9-Feb-12 12991 12988.33333

10-Feb-12 12966 12977.66667

11-Feb-12 13081 13012.66667

12-Feb-12 13079 13042

13-Feb-12 13118 13092.66667

15-Feb-12 13146 13114.33333

16-Feb-12 13298 13187.33333

17-Feb-12 13298 13247.33333

51

18-Feb-12 13296 13297.33333

19-Feb-12 13364 13319.33333

20-Feb-12 13354 13338

22-Feb-12 13286 13334.66667

23-Feb-12 13210 13283.33333

24-Feb-12 13111 13202.33333

25-Feb-12 13224 13181.66667

26-Feb-12 13288 13207.66667

27-Feb-12 13294 13268.66667

1-Mar-12 13299 13293.66667

2-Mar-12 13436 13343

3-Mar-12 13439 13391.33333

4-Mar-12 13404 13426.33333

5-Mar-12 13377 13406.66667

6-Mar-12 13383 13388

8-Mar-12 13268 13342.66667

9-Mar-12 13251 13300.66667

10-Mar-12 13128 13215.66667

11-Mar-12 13146 13175

52

12-Mar-12 13097 13123.66667

13-Mar-12 13091 13111.33333

15-Mar-12 13131 13106.33333

16-Mar-12 13230 13150.66667

17-Mar-12 13223 13194.66667

18-Mar-12 13260 13237.66667

19-Mar-12 13125 13202.66667

20-Mar-12 13110 13165

22-Mar-12 13042 13092.33333

23-Mar-12 13056 13069.33333

24-Mar-12 12956 13018

25-Mar-12 12924 12978.66667

26-Mar-12 12975 12951.66667

27-Mar-12 12986 12961.66667

29-Mar-12 12951 12970.66667

30-Mar-12 12931 12956

31-Mar-12 12952 12944.66667

1-Apr-12 13005 12962.66667

3-Apr-12 13019 12992

53

5-Apr-12 12992 13005.33333

INTERPRETATION

As above data we are taken GOLD GUINEA Price moving from February 1st to April 5th, on 1st

February it is closed on 13183 in between the period on Feb. 19th it is closed to 13364 , latterly on 26th Feb.

it came down to 13288, on 3rd march it is increased to 13439 , on 30th march again it is come down to

12931 , end of the contract on 5th April it is closed to 12992.

If you see total data the gold is highly fluctuated because the gold leads the economy.

54

CHART-4.2

GOLD GUINEA 3 MONTHS MOVING AVERAGE

The below graph shows daily prices like closing prices of the gold guinea in the form of the

technical tool indicator simple moving averages.

55

TABLE-4.3

GOLDMINI-100 GRAMS

The below table shows 3 MONTHS moving averages of goldmine.

Date Close(Rs)

3 MONTHS MOVING AVERAGE

6-Jan-12 16942 0

7-Jan-12 16914 0

8-Jan-12 16912 16922.66667

9-Jan-12 16980 16935.33333

11-Jan-12 17103 16998.33333

12-Jan-12 16971 17018

13-Jan-12 16888 16987.33333

14-Jan-12 16973 16944

15-Jan-12 16930 16930.33333

16-Jan-12 16943 16948.66667

18-Jan-12 16927 16933.33333

19-Jan-12 17024 16964.66667

20-Jan-12 16801 16917.33333

56

21-Jan-12 16626 16817

22-Jan-12 16555 16660.66667

23-Jan-12 16571 16584

25-Jan-12 16548 16558

27-Jan-12 16526 16548.33333

28-Jan-12 16372 16482

29-Jan-12 16329 16409

30-Jan-12 16343 16348

1-Feb-12 16647 16439.66667

2-Feb-12 16766 16585.33333

3-Feb-12 16659 16690.66667

4-Feb-12 16165 16530

5-Feb-12 16106 16310

6-Feb-12 16294 16188.33333

8-Feb-12 16279 16226.33333

9-Feb-12 16328 16300.33333

10-Feb-12 16287 16298

11-Feb-12 16471 16362

12-Feb-12 16450 16402.66667

57

13-Feb-12 16500 16473.66667

15-Feb-12 16598 16516

16-Feb-12 16732 16610

17-Feb-12 16757 16695.66667

18-Feb-12 16779 16756

19-Feb-12 16860 16798.66667

20-Feb-12 16822 16820.33333

22-Feb-12 16703 16795

23-Feb-12 16599 16708

24-Feb-12 16494 16598.66667

25-Feb-12 16696 16596.33333

26-Feb-12 16773 16654.33333

27-Feb-12 16790 16753

1-Mar-12 16799 16787.33333

2-Mar-12 17017 16868.66667

3-Mar-12 17023 16946.33333

4-Mar-12 16955 16998.33333

5-Mar-12 16905 16961

6-Mar-12 16913 16924.33333

58

8-Mar-12 16748 16855.33333

9-Mar-12 16736 16799

10-Mar-12 16499 16661

11-Mar-12 16540 16591.66667

12-Mar-12 16458 16499

13-Mar-12 16463 16487

15-Mar-12 16541 16487.33333

16-Mar-12 16710 16571.33333

17-Mar-12 16680 16643.66667

18-Mar-12 16750 16713.33333

19-Mar-12 16502 16644

20-Mar-12 16498 16583.33333

22-Mar-12 16415 16471.66667

23-Mar-12 16439 16450.66667

24-Mar-12 16295 16383

25-Mar-12 16254 16329.33333

26-Mar-12 16324 16291

27-Mar-12 16356 16311.33333

29-Mar-12 16261 16313.66667

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30-Mar-12 16242 16286.33333

31-Mar-12 16232 16245

1-Apr-12 16377 16283.66667

3-Apr-12 16427 16345.33333

5-Apr-12 16377 16393.66667

INTERPRETATION

As above data we are taken GOLD MINI Price moving from January 6th to April 5th, on 6th January it

is closed on 16942, in between the period on 11th Jan it is closed to 17103 , latterly on 5th Feb. it came

down to 16106, on 3rd march it is increased to 17023 , on 25 th march again it is come down to 16254 , end

of the contract on 5th April it is closed to 16377.

If you see total data the gold is highly fluctuated because the gold leads the economy.

60

CHART-4.3

GOLDMINI 3 MONTHS MOVING AVERAGE

The below graph shows daily prices like closing prices of the goldmine in the form of the technical

tool indicator simple moving averages.

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TABLE-4.4

GOLD HNI –(1000 ) 3 MONTHS MOVING AVERAGES

The below table shows 3 MONTHS moving averages of gold hni.

Date Close(Rs)

3 MONTHS MOVING AVERAGE

1-Jan-12 16835 0

2-Jan-12 16835 0

4-Jan-12 16667 16779

5-Jan-12 16667 16723

6-Jan-12 16667 16667

7-Jan-12 16834 16722.66667

8-Jan-12 16834 16778.33333

9-Jan-12 16834 16834

11-Jan-12 16834 16834

12-Jan-12 16834 16834

13-Jan-12 16834 16834

14-Jan-12 16834 16834

15-Jan-12 16834 16834

16-Jan-12 16834 16834

62

18-Jan-12 16834 16834

19-Jan-12 16834 16834

20-Jan-12 16834 16834

21-Jan-12 16666 16778

22-Jan-12 16499 16666.33333

23-Jan-12 16499 16554.66667

25-Jan-12 16499 16499

27-Jan-12 16499 16499

28-Jan-12 16499 16499

29-Jan-12 16334 16444

30-Jan-12 16334 16389

1-Feb-12 16334 16334

2-Feb-12 16334 16334

3-Feb-12 16497 16388.33333

4-Feb-12 16497 16442.66667

5-Feb-12 16332 16442

6-Feb-12 16332 16387

8-Feb-12 16332 16332

9-Feb-12 16332 16332

63

10-Feb-12 16332 16332

11-Feb-12 16332 16332

12-Feb-12 16332 16332

13-Feb-12 16332 16332

15-Feb-12 16332 16332

16-Feb-12 16332 16332

17-Feb-12 16495 16386.33333

18-Feb-12 16495 16440.66667

19-Feb-12 16495 16495

20-Feb-12 16495 16495

22-Feb-12 16495 16495

23-Feb-12 16495 16495

24-Feb-12 16495 16495

25-Feb-12 16495 16495

26-Feb-12 16660 16550

27-Feb-12 16660 16605

1-Mar-12 16660 16660

2-Mar-12 16660 16660

3-Mar-12 16827 16715.66667

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4-Mar-12 16827 16771.33333

5-Mar-12 16827 16827

6-Mar-12 16827 16827

8-Mar-12 16827 16827

9-Mar-12 16827 16827

10-Mar-12 16827 16827

11-Mar-12 16659 16771

12-Mar-12 16492 16659.33333

13-Mar-12 16492 16547.66667

15-Mar-12 16327 16437

16-Mar-12 16327 16382

17-Mar-12 16490 16381.33333

18-Mar-12 16490 16435.66667

19-Mar-12 16490 16490

20-Mar-12 16490 16490

22-Mar-12 16490 16490

23-Mar-12 16490 16490

24-Mar-12 16325 16435

25-Mar-12 16325 16380

65

26-Mar-12 16325 16325

27-Mar-12 16325 16325

29-Mar-12 16162 16270.66667

30-Mar-12 16162 16216.33333

31-Mar-12 16000 16108

1-Apr-12 16000 16054

3-Apr-12 16000 16000

5-Apr-12 16160 16053.33333

INTERPRETATION

As above data we are taken GOLD HNI Price moving from January 1st to April 5th , on 1st January it

is closed on 16835 in between the period on Jan 26 th it is closed to 16666 , latterly on 6 Feb. it came down

to 16332, on 10 march it is increased to 16827 , on 27th march again it is come down to 16325 , end of the

contract on 5th April it is closed to 16160.

If you see total data the gold is highly fluctuated because the gold leads the economy.

66

CHART-4.4

GOLDHNI 3 MONTHS MOVING AVERAGES

The below graph shows daily prices like closing prices of the gold hni in the form of the technical tool indicator simple moving averages.

67

ANALYSIS AND INTERPRITATIONS OF THE GRAPH

The above graphs shows daily prices like closing prices of the precious metal commodity (gold) in

the form of the technical tour indicator “simple moving avarage”

The moving avarage is the graph shows the moving trends of the index of gold futures for the six

months period data are tekan in to consideration of defferant gold contracts.

Moving avarage is used in-order to analyse the past trends of the particular commodity (gold) and

helping interpretations for the analyst and investors whether to buy, hold or sell particular

commodity in the near future.

In this particular graphs we have taken three MONTHS moving avarages on daily basis for period of

three months. Three MONTHS moving avarage is generally consider for interpreting the short term

trends are intraday trading on a daily terms.

In commodity market most of the investors are trading in intra-day points, they generally make both

buy and sell signals in a day. The buyers and sellers mainly follow three MONTHS moving

avarages.

Here volumes are not taken in to concideration for analysis porpos. Even they effect the high-low in the

market. This analysis is based only on each day trading closing prices.

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ANALYSIS FOR GOLD

In this starting contract the closing prices of three MONTHS moving averages which indicate a step

increasing in the commodity future and it happens in the january as there was no fluctuation in commodity

market and from the january onwards there were high incresing of gold prices. The moving average shows a

incresing trend in the commodity market which shows a very bullish trend,because of high incresing trend

and also the closing prices of the contract period.

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Chapter – 5

FINDINGS, SUGGESTIONS AND CONCLUSIONS

70

FINDINGS

GOLD Price moving from January 1st to April 5th, on 1st January it is closed on 16747 in between the

period on Jan 11th it is closed to 17092, latterly on 29 th Jan it came down to 16317, on 2nd Feb. it is increased

to 16754, on 5th Feb. again it is come down to 16106, end of the contract on 5th April it is closed to 16377.

The gold is highly fluctuated because the gold leads the economy.

In GOLD HNI Price moving from January 1st to April 5th , on 1st January it is closed on 16835 in

between the period on Jan 26th it is closed to 16666 , latterly on 6 Feb. it came down to 16332, on 10 march

it is increased to 16827 , on 27th march again it is come down to 16325 , end of the contract on 5 th April it is

closed to 16160.

GOLD GUINEA Price moving from February 1st to April 5th, on 1st February it is closed on 13183 in

between the period on Feb. 19th it is closed to 13364 , latterly on 26 th Feb. it came down to 13288, on 3rd

march it is increased to 13439 , on 30th march again it is come down to 12931 , end of the contract on 5 th

April it is closed to 12992.

GOLD MINI Price moving from January 6th to April 5th, on 6th January it is closed on 16942, in

between the period on 11th Jan it is closed to 17103 , latterly on 5 th Feb. it came down to 16106, on 3rd

march it is increased to 17023 , on 25th march again it is come down to 16254 , end of the contract on 5 th

April it is closed to 16377.

71

REASONS FOR RISE IN GOLD PRICE

The gold price closed at $825.50. On January 21, 1980, but today, it takes $2,200.00 to buy what

$825.50 bought in January 1980. The reason for the rise in the gold price are given below;

The Dollar Slide

.

Flight to Quality

.

Oil Versus Gold Ratio

Central Commodity Exchange Sales and Purchases

.

Investment Demand

.

Commodities Super-Cycle

.

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SUGGESTIONS

The volatility of the Gold future price has been derived and it shows the price is highly volatile

Investing in the Gold is more profitable and less risky since, Gold price is expected to increase further in the long,

Gold prices float freely in accordance with supply and demand, responding quickly to political and economic events.

These findings are of considerable importance for gold investors and traders.

.

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CONCLUSION

In the last three months the market was showing more of buying signals than sellings.

This shows a good trend for gold in near future for long term investors and prices might rise and

mostly investor are earning profit if analyse the market properly.

The period spent on training was interesting and the officers in charges of various section works were

good to extend their full co-operation and explain about the detail of the work

Without their support we cannot make a good report to our project

To conclude this training and project as help us to know about gold trading in market

74

BIBLIOGRAPHY

75

BIBLIOGRAPHY

BOOKS & MAGAZINES

COMMODITY MARKET AN INTRODUCTION BY JANARDHANAN

BUSINESS WORLD MAGAZINE

COMMODITY MARKET MAGAZINE

CORPORATE INDIA MAGAZINE

HINDU NEWS PAPER

ECONOMICS TIME

WEBSITES

www.gold.org

www.gfms.co.uk

www.bullionindia.com

www.ncdex.com

www.mcxindia.com

www.nmce.com

www.fmc.gov.inv

www.sebi.gov.in

www.investopedia.com

www.wikipedia.com

www.netdaniya.com

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