MONEY FAIR EVENT

Gold Investing
Invest Into ‘Gold’ to get Safe returns

Prepared by : Raghav Soni - Dhanwanti Lakhani - Bhavesh Vwivedi

18/12/2009

Gold is the life belt for all seasons, especially the dangerous ones
 INVESTMENT IN GOLD..
“Your 'loss-proof' investment”

 Reasons investors buy gold

Of all the precious metals, failure, market declines,
gold is the most popular as inflation, war - social unrest,.
an investment. Investors
generally buy gold as a hedge
or safe haven against any
economic, political, social or
currency-based crises. These
crises include investment,
national debt, currency

 Factors influencing the gold pricE

Today, like all investments and commodities, the price of gold is
ultimately driven by supply and demand. The price of gold is
mainly affected by changes in sentiment, rather than changes in
annual production. According to the World Gold Council, annual
mine production of gold over the last few years has been close to
2,500 tones. About 2,000 tones goes into jewellery or
industrial/dental production, and around 500 tones goes to retail
investors and exchange traded gold funds.
Did you know: The best estimates available suggest that the total volume of gold ever mined up
was approximately 161,000 tonnes. To visualise this imagine a single solid gold cube with edges
of about 19 metres (about three metres short of the length of a tennis court). That's all that has
ever been produced.
 Gold Prices in India

March End Gold Price per 10 gm (Rs)

1925 18
1930 18
1935 30
1940 36
1945 62
1950 99
1955 79
1960 111
1965 71
1970 184
1975 540
1980 1330
1985 2130
1990 3200
1995 4658
1996 5713
1997 4750
1998 4050
1999 4220
2000 4395
2001 4410
2002 5030
2003 5260
2004 6005
2005 6165
2006 8210
2007 9500
2008 13100
2009 17000+
Methods of investing into gold in India
Investment in gold can be done directly through bullion derivatives or physical ownership, or
indirectly through gold exchange-traded funds, certificates or Bonds.

 Bullion Derivatives:
Precious metals in bulk form are known as bullion, and are traded on commodity Exchanges.
The defining attribute of bullion is that it is valued by its mass and purity rather than by a face
value as money.

Derivatives for contracts such as gold forwards, futures and options, currently trade on various
exchanges around the world and over-the-counter (OTC) directly in the private market.

Investors in India can take exposure in U.S. based Commodity exchanges through hedge
positions or directly invest money through Indian Commodity Exchange like National
Commodity and Derivatives Exchange (NCDEX) and MCX(Multi-Commodity Exchange).

MCX just recently launched the Exchange of Futures for Physicals (EFP) transaction facility for
the first time in the Indian commodities market. An EFP transaction is exchange of futures
contracts for a physical commodity transaction between two market participants.

EFP allows individuals/companies to choose their trading partners, delivery site, the grade of
product to be delivered and the timing of delivery, and simultaneously use the futures market
for pricing their products.

The price risk is the main cause for defaults in physical trade. EFP allows one to eliminate this
through the futures market.

 Coins and physical Holdings:

The most traditional way of investing in gold is by buying bullion gold bars or coins. Gold bars
or coins can be held either directly (i.e. held directly by you in your own safe custody) or
indirectly (held in a vault on your behalf)

Buying gold coins is the most popular way of holding gold. Typically bullion coins are priced
according to their weight, with little or no premium above the gold price.
Financial & Banking juggernauts like ICICI Bank provides gold coins in the denominations of 2.5 g, 5 g,
8 g, 20 g, and 50 g to retail customers. All gold coin are certified for purity and holds 24-Carat with a
99.99% Assay Certification of highest purity levels as per the international standards

 Gold Certificates & Bonds

A certificate of ownership can be held by gold investors, instead of storing the actual gold
bullion. Gold certificates allow investors to buy and sell the security without the inconvenience
associated with the transfer of actual physical gold. Some counter that, due to the difficulties of
owning and storing a significant amount of gold, a government backed and guaranteed
product is the most convenient and cost effective route to take.

 Gold ETF’s(exchange-traded funds)

Gold ETF (or GETF) is an exchange-traded fund (ETF) that aims to track the price of gold. Gold
exchange-traded funds are traded on the major stock exchanges including National Stock
Exchange(India) .

Each ‘gold’ ETF has a different structure outlined in its prospectus. Such instruments do not
necessarily hold physical gold. For example, some gold ETF's generally track the price of gold
using derivatives whereas some ETF’s invest part money into metal companies.

Currently there are Six gold ETF’s listed on NSE(National Stock Exchange).One each from
Reliance,Quantum,Sbi,Kotak.

Did you know: India is the world’s largest consumer of gold, as Indians buy about 25 per cent of the
world’s gold purchasing approximately 800 tonnes of gold every year. India is also the largest
importer of the yellow metal; in 2008 India imported around 400 tonnes of gold.
Gold is the life belt for all seasons, especially the dangerous ones

Benefits of Investment in Gold:

Gold preserves its value - It is indestructible, relatively scarce, and cannot
be manufactured. Gold prices have risen for four years in a row, averaging
annual growth of 13.5%.

Gold has low volatility - There is only a fixed supply of gold on the market
at any one time. This inelasticity of the supply creates an exponential increase in
value with increased demand.
Gold has growing demand - Growing opportunity leads to growing
demand and of course decreases the number of available coins while prices
continue to climb.

Gold presents considerable tax advantages - Unlike most other

investments, gold is only taxed on liquidation profits. There is also no federal
income tax liability on wash sales.

Gold has predictable liquidity - Gold is also an internationally recognized

and trusted form of exchange, and has been so since ancient times
Future Outlook For Gold Prices:
Gold has given returns in excess of 36% over a period of 1 year
(between 2008-09). Commodities Experts believe gold could still
deliver 10-15 % annualized returns for many years to come.

A Case to Ponder:

Did you know: In 2007 China (with 276 tones) overtook South Africa as the world's largest gold
producer, the first time since 1905 that South Africa has not been the largest.
Caution: Gold investment might be safest than investing in stocks or some
sort of investment funds, however, it is very unlikely that you will get rich, at least
in a short period.

Gold investment also does not provide dividend revenue, while its physical
storage can present additional difficulties and costs. However, there are
possibilities for gold investment in a form of a certificate or an account in which
the owner does not held the physical gold but later can represent certain second
thoughts. If you do not plan to invest in physical gold and do not have the
patience to wait for a longer period hoping that the price of gold will arise to the
point it would be worth to sell it, gold investment perhaps is not the real option
for you. After all, besides safety from inflation gold investment might not result
any greater profit even after a longer period.

Thank You