GOLD MARKET

Submitted to : Mr. Himal Parikh

Submitted by : Prashant Maharshi

MOST-FAVORED INVESTMENT INSTRUMENT IN INDIA

UNIQUE ASSET CLASS THAT COMBINES STEADY RETURNS, LIQUIDITY AND AN EMOTIONAL

SATISFACTION OF BUYERS

HAS A STRONG DIVERSIFYING EFFECT ON A PORTFOLIO

GOLD

PERFORMANCE OF GOLD

WAYS OF INVESTING IN GOLD

Physical gold purchase

Gold Coins Gold Bars Jewellery

PAPER GOLD

Gold ETFs Gold FUND OF FUND (FOF) E-Gold

GOLD-ETFs

Offered by Mutual Fund.

Regulated by SEBI.

held electronically in the Demat form.

FEATURES

99.5% pure.

Transparent pricing as it is trading on bourses.

Has high liquidity.

No wealth tax.

Sold at stock exchange at prevailing market price.

AUM GOLD-ETFs

AUM of gold ETFs shot up from Rs 3,765 Crore to Rs 9,202 Crore.

rise of 144% in 9 months between March-December 2011.

In last 1 year alone, AUM has risen 153%.

AUM PERFORMANCE

GOLD ETFs AUM MARCH 2011 (Cr) AUM MARCH 2012 (Cr) CHANGE

Goldman Bees NA 2,960.51 -

SBI Gets 178.62 987.69 809.07

Reliance Gold 434.38 2,650.57 2216.19

Kotak Gold 257.98 1,026.58 768.6

UTI Gold 497.64 655.72 158.08

Quantam 27.37 48.24 20.87

Religare Gold 42.84 57.13 14.29

Source: amfi

RETURN ON GOLD-ETFs

GOLD ETFs

RETURN ON INVESTMENT

1 YEAR 3 YEAR 5 YEAR 10 YEAR

Goldman Bees 29.9 23.8 24.7 -

SBI Gets 30.7 - - -

Reliance Gold 30.4 23.8 - -

Kotak Gold 30.6 23.7 - -

UTI Gold 30.6 23.8 24.8 -

Quantam 30.6 23.8 - -

Religare Gold 30.6 - - -

Source: Capital4.com

YEARLY TRADED VALUE OF GOLD-ETFs

YEARS TOTAL TRADED VALUE(Rs) Y-O-Y GROWTH (%)

2008-09 1,172 -

2009-10 1,842 57

2010-11 4,047 121

2011-12 11,532 183

Source : NSE

GOLD-FOF

Offered by Mutual Fund.

Regulated by SEBI.

Holed by Mutual Fund Units.

1.5% expense ratio allowed.

FEATURES

Purity is high.

Pricing is transparent and standardized.

Can be redeemed directly with the MF at day end NAV with exit load if applicable.

No wealth tax.

No transaction charge.

High liquidity.

E-GOLD

Offered by National spot exchange.

Holed by Demat Account.

FEATURE

99.9% PURITY.

Pricing is Transparent as it is traded on the exchange.

Better liquidity.

Bourses responsible for security.

WHY PAPER GOLD BETTER?

Paper gold are highly liquid, one can buy or sell paper gold very fast.

Price of the paper gold is completely transparent.

Profits from Gold ETFs and Gold fund are treated as long-term capital gains and are taxed at lower rate, if holding period exceeds 1 year.

Paper gold can be bought in small dominations.Paper Gold can be easily converted into physical

gold by rematerialisation. Investors can convert their E-Gold into bars of 99.5% purity.

GOLD LOANS

Gold loan is loan against Gold.

most convenient way to receive cash in no time from any NBFC or Bank

consist of minimal documentation & no processing time.

WHY RBI INTERFARED?

Gold lending non banking financial companies were lending with loan-to value ratio of 75-80%.

Gold market in India Rs 3 trillion.

Rs 50000 crore is with each NFBC and commercial bank

Rs 2 trillion is with unorganized market which is primarily run by private money lenders.

RBI WATCH

NBFC can’t grant loan above 60% of the value of gold.

Interest rate and growth rate on gold loans to come down.

 NBFC that have gold loans of more than 50% of their

total financial assets have to maintain Teir-1 capital ratio of 12% from April 2014.

 Banks need to reduce their regulatory exposure to a

single co to 7.5% of their capital fund of their current 10%.

IMPACT ON NBFC

Since the effect of new norms operating on gold loan segment likely to face a huge challenge.

Interest rates have to be brought down taking a severe hit on margin.

  SKS microfinance ltd, which initially plan to offer

gold loan business from 200 branches is now planning to go slow.

 SKS offering gold loan at 27 branches and has a Rs

24 crore book.

Manappuram finance ltd and Muthoot finance ltd that had 70-100% business growth in past few years, On 25 April, Manappuram finance rose by 0.17% to Rs 29.8 and muthoot finance fell 0.89% to Rs 122.35 on BSE.

Since new norm came into effect in March, Manappuram has fallen to 34.22% and muthoot finance has dropped 24.82% on BSE and due to which BSE dropped 2.56%.

  Loan-to-value of gold loan firms 73-75%. They registered annual growth of 55% in FY 2012 after

100% growth in FY 2011.

HISTORICAL DATA OF IMPORTS

YEAR IMPORTS (Billion $) CHANGE (Billion $) CHANGE (%)

2007-08 15 - -

2008-09 22 7 46.67

2009-10 30 8 36.36

2010-11 33 3 10

2011-12 58 25 75.75

Source: Article

WHERE GOLD IS HEADED?

When one started to believe that Euro zone crisis is under control the biggest worry sprouts up that it may spread to other nations. Recently US have lost its AAA tag and investors are losing its faith in fiat currency and getting into gold.

Central bank has also started buying Gold for diversification purpose.

  Shimmering tension in west Asia and US-Iran stand-off over Iran’s

plan to develop nuclear technology are also fueling the spurt in Gold prices. Price of Gold has strong correlation with crude oil prices.

The undertone in gold is still very bullish and one can expect a gain of 15-20% from current level in one year.

There has been 12% gain in dollars which has cushioned the price of gold in India.

 Demand for gold in China is picking up,

which overtook India as the biggest consumer of gold in October- December 2011.

World Gold Council estimates that china will unseat India as the biggest gold market in 2012.

WHY INVEST IN GOLD?

Gold is considered as a hedge against investment.

Gold is an efficient store of value during uncertainty as value of gold cannot be manipulated by monetary policies of the nation or a government.

Gold has little correlation with other asset classes, such as equity and debt, which help diversify portfolio.

INVESTORS REASON TO INVEST IN GOLD

Investment optionAs when the market is volatile investor tends

to move from risky assets to the assets like gold. Gold is traded on a d\dollar-denominated basis. In the time of crisis, capital often flow out of emerging market this strengthen the dollar against emerging market currency. The hike in gold price is due to increase in international gold price or by appreciation of the dollar against rupees.

Inflation-HedgeWhen economy is doing well inflation tend to

increase due to increase in demand, income and consumption which lead to increase in cost of goods and services and due to increase in income people buy more car house etc which lead to increase in price f the fuel, metals etc.

Even at the time of inflation purchasing power of the gold remain more or less constant as it does not generate income stream.

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