CHAPTER I

Introduction
Gold has long been considered the most desirable of precious metals, and its value has been used
as the standard for many currencies in history. Gold has been used as a symbol for purity, value,
royalty. One of the salient features about the gold is that a single gram of weight is not at all
wasted since its exploration. It has been rounding in different hands in one or the other way.
The history of gold starts from 2600BC. A huge description is available in the Egyptian
Hieroglyphs. It may be the first metal used by humans and was valued for ornamentation and
rituals. Important locations famous in the name of gold are Red sea in Saudi Arabia, Lydia,
Romania, Las medullas, in Spain, Rosia Montana in Transylvania, Central America, Peru and
Columbia. Today, gold has emerged as an important mean for investments also. Volatile markets
and unstable economic conditions have also added to it. China is largest producer followed by
South Africa. But India is the largest consumer of gold, where it is largely used for jewellery
together with investment. India’s diversified religious customs and rituals have helped to the
high demand for gold.
 History
The symbol for the Sun has been used since ancient times to represent gold. The Turin mining
papyrus Gold has been known and highly-valued since prehistoric times. It may have been the
first metal used by humans and was valued for ornamentation and rituals. Egyptian hieroglyphs
from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was "more
plentiful than dirt" in Egypt.The south-east corner of the Black Sea was famed for its gold.
Exploitation is said to date from the time of Midas, and this gold was important in the
establishment of what is probably the world's earliestCoinage in Lydia between 643 and 630 BC.
The Romans developed new methods for extracting gold on a large scale using hydraulic mining
methods, especially in Spain from 25 BC onwards and in Romania from 150 AD onwards.The
Mali Empire in Africa was famed throughout the old world for its large amounts of gold. Mansa
Musa, ruler of the empire (1312–1337) became famous throughout the old world for his great
hajj to Mecca in 1324. When he passed through Cairo in July of 1324, he was reportedly
accompanied by a camel train that included thousands of people and nearly a hundred camels. He
gave away so much gold that it took over a decade for the economy across North Africa to
recover, due to the rapid inflation that it initiated.During the 19th century, gold rushes occurred
whenever large gold deposits were discovered. The first documented discovery of gold in the
United States was at the Reed Gold Mine near George Ville, North Carolina in 1803. The first
major gold strike in the United States occurred in a small north Georgia town called Dahlonega.
Further gold rushes occurred in California, Colorado, Otago, Australia, Witwatersrand, Black
Hills, and Klondike.Because of its historically high value, much of the gold mined throughout
history is still in circulation in one form or another.

 Applications

In various countries, gold is used as a standard for monetary exchange, in coinage and in
jewellery. Pure gold is too soft for ordinary use and is typically hardened by alloying with copper
or other base metals. The gold content of gold alloys is measured in carats (k), pure gold being
designated as 24k.
 As a medium of monetary exchange
Gold coins intended for circulation from 1526 into the 1930s were typically a standard 22k alloy
called crown gold, for hardness. Modern collector/investment bullion coins are typically 24k,
although the American Gold Eagle and British gold sovereign continue to be made at 22k, on
historical tradition. The world wide used coins are American Gold Eagle, British Gold
Sovereign, Canadian Gold Maple Leaf, Gold Kangaroos, Australian Gold Nugget, Australian
Lunar Calendar Series, Austrian Philharmonic and American Buffalo.

 Jewellery
Because of the softness of pure (24k) gold, it is usually alloyed with base metals for use in
jewellery, altering its hardness and ductility, melting point, colour and other properties. Alloys
with lower cartage, typically 22k, 18k, 14k or 10k, contain higher percentages of copper, or other
base metals or silver or palladium in the alloy. Copper is the most commonly used base metal,
yielding a redder colour. 18k gold containing 25% copper is found in antique and Russian
jewellery and has a distinct, though not dominant, copper cast, creating rose gold. Fourteen carat
gold-copper alloy is nearly identical in colour to certain bronze alloys, and both may be used to
produce police and other badges. Blue gold can be made by alloying with iron and purple gold
can be made by alloying with aluminium, although rarely done except in specialize jewellery.
Blue gold is more brittle and therefore more difficult to work with when making jewellery.
Fourteen and eighteen carat gold alloys with silver alone appear greenish-yellow and are referred
to as green gold. White gold alloys can be made with palladium or nickel. White 18 carat gold
containing 17.3% nickel, 5.5% zinc and 2.2% copper is silver in appearance.

 Other uses
 Salts and radio scopes of gold are used in pharmacology.
 Gold leaf, flakes or dust is used in some gourmet foodstuffs, sweets and drinks as
decorative ingredient.
 Gold is used in dentistry as crowns and permanent bridges.
 Gold threads are used in embroidery
 Gold has been used for electrical wiring in some high energy applications, atomic
experiment and other electrical equipments.
 Olympics, Nobel Prize and other competitions and honours award a gold medal to the
winner.

 Occurrence

In nature, gold most often occurs in its native state (that is, as a metal), though usually alloyed
with silver. Native gold contains usually eight to ten per cent silver, but often much more - alloys
with a silver content over 20% are called electrum. As the amount of silver increases, the colour
becomes whiter and the specific gravity becomes lower. Ores bearing native gold consist of
grains or microscopic particles of metallic gold embedded in rock, often in association with veins
of quartz or sulphide minerals like pyrite. These are called "lode" deposits. Native gold is also
found in the form of free flakes, grains or larger nuggets that have been eroded from rocks and
end up in alluvial deposits (called placer deposits). Such free gold is always richer at the surface
of gold bearing veins owing to the oxidation of accompanying minerals followed by weathering,
and washing of the dust into streams and rivers, where it collects and can be welded by water
action to form nuggets.
  Gold minerals

Gold usually occurs in nature as the native element or as the gold silver alloy electrum. Gold
does occur combined with tellurium as the minerals calaverite, krennerite, nagyagite, petzite and
sylvanite. Gold also occurs as the rare bismuthide maldonite (Au2Bi) and the antimonide
aurostibite (AuSb2). Gold also occurs as rare alloys with copper, lead, and mercury: the minerals
auricupride (Cu3Au), novodneprite (AuPb3) and weishanite (AuAg)3Hg2).

 Production

Since the 1880s, South Africa has been the source for a large proportion of the world’s gold
supply, with about 50% of all gold ever produced having come from South Africa. Production in
1970 accounted for 79% of the world supply, producing about 1,000 tones. However by 2007
production was just 272 tones. This sharp decline was due to the increasing difficulty of
extraction, changing economic factors affecting the industry, and tightened safety auditing. 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.Other major producers are United
States, Australia, China, Russia and Peru. Mines in South Dakota and Nevada supply two-thirds
of gold used in the United States. In South America, the controversial project Pascua Lama aims
at exploitation of rich fields in the high mountains of Atacama Desert, at the border between
Chile and Argentina. Today about one-quarter of the world gold output is estimated to originate
from artisanal or small scale mining.After initial production, gold is often subsequently refined
industrially by the Wohlwill process or the Miller process. Other methods of assaying and
purifying smaller amounts of gold include parting and inquartation as well as cupellation, or
refining methods based on the dissolution of gold in aqua regia.The world's oceans hold a vast
amount of gold, but in very low concentrations (perhaps 1–2 parts per 10 billion).
  Price

Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed
with other metals the term carat or karat is used to indicate the amount of gold present, with 24
karats being pure gold and lower ratings proportionally less. The purity of a gold bar can also be
expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as
0.995 being very pure.The price of gold is determined on the open market, but a procedure
known as the Gold Fixing in London, originating in September 1919, provides a daily
benchmark figure to the industry. The afternoon fixing appeared in 1968 to fix a price when US
markets are open.

 Current demand and supply statistics Gold supply and demand Q4:2009:
At US$23.6bn, global dollar demand for gold reached new heights in the last quarter of 2009,
rising 12% on year earlier levels. Global investment demand for gold showed the strongest surge,
reaching $3.9 billion in Q4 2009, 29% higher than Q4 2009, with particular strength in the US,
China, Egypt and Vietnam. Despite a number of markets turning to gold due to its investment
attributes as a safe haven in times of rising inflation and unstable equity markets, identifiable
global investment demand in tonnage terms was down by 4% over Q4
2008 to 119.8, as some investors took profits. This decline represents a 9% decrease in net retail
investment, which was partly offset by a move to positive net investment in Exchange Traded
Funds (ETFs) and similar products.

 FACTORS INFLUENCING GOLD PRICE

Today, like all investments and commodities, the price of gold is ultimately driven by supply and
demand, including hoarding and disposal. Unlike most other commodities, the hoarding and
disposal plays a much bigger role in affecting the price, because most of the gold ever mined still
exists and is potentially able to come on to the market for the right price.
  Bank failures
When dollars were fully convertible into gold, both were regarded as money. However, most
people preferred to carry around paper banknotes rather than the somewhat heavier and less
divisible gold coins.

 Low or negative real interest rates

If the return on bonds, equities and real estate is not adequately compensating for risk and
inflation then the demand for gold and other alternative investments such as commodities
increases.

 War, invasion, looting, crisis

In times of national crisis, people fear that their assets may be seized and that the currency may
become worthless. They see gold as a solid asset which will always buy food or transportation.
Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises.

 INDIAN JEMS JEWELERY INDUSTRY

The exports of gems and jewellery registered an upbeat growth of per cent in dollar terms during
April-September 2007-2008. In 2007-2008 the exports of this sector increased by 16.8% and
crossed a level of US$10.5. This is a particularly interesting industry from an Indian stand point,
since it involves imported raw materials, domestic value added and global markets and provides
skilled employment. Indian gems firms aretightly integrated into global production chains. In
order to give a boost to exports of gems and jewellery, Government took major policy initiative
during the same year.
 OVERVIEW OF GOLD INDUSTRY IN INDIA

 India is the largest consumer of gold in the world followed by China and Japan.
 India is emerging as world’s largest trading centre of gold with a target of US$18 bn set
for 2011.
 India dominates the world’s cut and polished diamonds (CPD) market.
 Consumer Behaviour

All of us are consumers. We consume things of daily use; we also consume and buy these
products according to our needs, preferences and buying power. These can be consumable goods,
durable goods, specialty goods or industrial goods.

What we buy, how we buy, where and when we buy, in how much quantity we buy depends on
our perception, self concept, social and cultural background and our age and family cycle, our
attitudes, beliefs, values motivation, personality, social class and many other factors that are both
internal and external to us.

 CONSUMER BEHAVIOUR

Consumer behaviour is the study of how people buy, what they buy, when they buy and why
they buy. It blends elements from psychology, sociology, socio-psychology, anthropology and
economics. It attempts to understand the buyer decision processes/buyer decision making
process, both individually and in groups. It studies characteristics of individual consumers such
as demographics, psychographics, and behavioural variables in an attempt to understand people's
wants. It also tries to assess influences on the consumer from groups such as family, friends,
reference groups, and society in general.
Belch and Belch define consumer behaviour as 'the process and activities people engage in when
searching for, selecting, purchasing, using, evaluating, and disposing of products and services so
as to satisfy their needs and desires'.
Buyer- an enigma

Although it is important for the firm to understand the buyer and accordingly evolve it marketing
strategy, the buyer or consumer continues to be an enigma – sometimes responding the way the
marketer wants and on other occasions just refusing to buy the product from the same marketer.
For this reason, ht buyers’ mind has been termed as a black box, the marketer provides stimuli
but he is uncertain of the buyer’s response. This stimulus is a combination of product, brand
name, colour, style, packaging, intangible services, merchandizing, shelf display, advertising,
distribution, publicity and so forth.
Further today’s customer is being greatly influenced by the media especially electronic.
Technological developments in the field of information, biotechnology and genetics, and
intensive competitions in all products and services are also impacting consumer choices.

FACTORS INFLUENCIG CONSUMER BEHAVIOUR

The factors that influence consumer behavior can be classified into internal factors and external
environmental factors. External factors do not affect the decision process directly, but percolate
or filter through the individual determinants, to influence the decision process.The individual
determinants that affect consumer behaviour are:
 Motivation and involvement
 Attitudes
 Personality and self concept
 Learning and memory
 Information processing
 The external influences or factors are:
 Cultural influences
 Sub-cultural influences
 Social class influences
 Social group influences
 Family influences
 Personal influences
 Other influences
  MODELS OF CONSUMER BEHAVIOUR
We have already seen that there are many factors which influence the decision making of
consumers. There are various consumer models which help in the under standing of consumer
behavior. They are formulated by different economist and management scientist based on
various ideas. They are:
 Economic Model
 Psychological Model
 Input process output Model
 Sociological Model
 Hawrath Sheth Model
 Sociological Model
 Engel-Blackwell-Kollath Model
 Model of family decision making
 Nicosia Model
 A model of industrial buying behaviour
 TOOLS TO STUDY CONSUMER BEHAVIOUR
It is important to marketer to regularly study buyer behaviour. The different tools available to
him or her are:
 Surveys
This is the most common technique used in studying consumer behaviour. It involves the use of
questionnaires. Different scaling techniques like Likert and Thurstone are used to measure
consumer attitudes. The problem with survey methodology is that it gives to marketer only
conscious response of the customer.
 Projective Techniques
To throw the customer off his or her conscious level and to get know subconscious-level
responses, projective techniques like word association, picture association and thematic
appreciation tests have been used. This provides valuable information on his or her product or
brand and about the customer’s lifestyle and self concept.
 Focus Group Discussions
This is another qualitative technique used to assess how customers perceive the product and use
situations. It also provides the marketer with valuable information on the target market.
  OUTLET SELECTION AND PURCHASE
As the number of product and brands are increasing in the market, so are the retail outlets and it
becomes very confusing for the customers to choose the retail stores. The selecting of a retail
store also involves almost the same process as selecting a brand. A retail outlet relates to a
service or a product which caters to the consumer. The retail trade occurs from the stores but, it
also occurs from catalogues, direct mail via print media, television and radio. Retailing is also
done in weekly markets which are put up in different areas of a city on different days. It is also
done from consumer, by means of various media. It has become very challenging and exciting,
both for consumers and marketers. The consumer may give first preference to the store or the
product or, he may give equal importance to both. Sometimes one prefers a store first, where he
can get friendly and logical advice to buy the product or brand of second priority, if he is assured
of proper service and proper guidance, rather than buying a product of his choice on first priority
and missing out on other important aspects of purchase.

 PURCHASE BEHAVIOUR
We have seen that in many products, decision-making is a very lengthy process, and takes a very
long time. The problem is recognized and a lot of information is gathered. After this is done, the
last two stages of decision-making, that is, the purchase and post purchase come into play.
Purchase is very important as it generates revenue, and post purchase gives us an idea of the likes
and dislikes of the consumer. Post purchase behaviour also establishes s link between the
marketer and the target market segment.Purchase is important to the marketer as the product was
planned, produced, priced, promoted and distributed after a lot of effort. If purchase does not
take place, the marketer has failed in his marketing effort. He then needs to change the marketing
mix. He has to change entire strategy, as the ultimate aim of the marketer is to float a product
which will generate revenue and bring satisfaction to the customers. Purchase is important for his
success, for achieving his objectives and for formulating competitive strategies against the
competitors. It marks the end of his search, end of his efforts and chooses the brand of his choice
for expected benefits.

 POST PURCHASE Behaviour

It is important for the marketer to know whether his product is liked by the consumer or not. He
wants the feedback about his product so that corrective action, if necessary, can be taken, and the
marketing mix be modified accordingly. Post purchase behaviour is the reaction of the
consumers; it gives an idea of his likes and dislikes, preferences and attitudes and satisfaction
towards the product. It indicates whether or not the purchase motives have been achieved.
Purchase is the means and post purchase is the end. Post purchase behaviour indicates whether or
not repeat purchase will be made, whether the customer will recommend the product to others or
not. It indicates whether long term profits can or cannot be expected. All this can be found out by
the post purchase behaviour or the customers. Post purchase is the last phase in the decision
making process.

Objective of the project

The objective of my project is:

 To study the current investment scenario

 To analyze the different options available for investment options
 To overview the different ways of investment in gold
 To acquaint the investor with the factors that affects the investment scenario in gold.
 To have the extensive overview on the working system of UNICON COMMODITY
SECTION.
 To analyze the different factors which affect the gold market and suggest the investors
about the right time to invest in gold.
 Also see that is it the right time to invest in gold or not.Scope of the study

The analysis of the factors which affect the prices of gold and the investment decisions in gold. A
comparative analysis of these factors has been done on the various parameters like Standard Deviation,
Regression; correlation to make possible the tedious task of analysis of these factors. Further analyzing
the factors will suggest the investors that whether it will be profitable for the investors to invest in gold or
not.