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Gold market


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Gold market

  2. 2. WHAT IS GOLD ? Gold is a chemical element with the symbol Au (from Latin: aurum "gold") and an atomic number of 79 Gold has been a valuable and highly sought-after precious metal for coinage, jewelry, and other. Gold standard most common basis for monetary policies throughout human history, being widely supplanted by fiat currency only in the late 20th century. Gold has also been frequently linked to a wide variety of symbolisms and ideologies
  3. 3. WHY GOLD IS IMPORTANT ? Monetary exchange Gold has been widely used throughout the world as a vehicle for monetary exchange, either by issuance and recognition of gold coins or other bare metal quantities, or through gold-convertible paper instrument by establishing gold standards in which the total value of issued money is represented in a store of gold reserves. Pure gold is too soft for day-to-day monetary use and is typically hardened by alloying with copper, silver or other base metals. The gold content of alloys is measured in carats (k). Pure gold is designated as 24k.
  4. 4. WHY GOLD IS IMPORTANT ? Investment Gold as an investment. Many holders of gold store it in form of bullion coins or bars as a hedge against inflation or other economic disruptions. However, some economists do not believe gold serves as a hedge against inflation or currency depreciation.
  5. 5. WHY GOLD IS IMPORTANT ? Jewelry The softness of pure (24k) gold, it is usually alloyed with base metals for use in jewelry, altering its hardness and ductility, melting point, color and other properties. Alloys with lower carats, typically 22k, 18k, 14k or 10k, contain higher percentages of copper, or other base metals or silver or palladium in the alloy. Industry Gold solder is used for joining the components of gold jewelry by high- temperature hard soldering or brazing. If the work is to be of hallmarking quality, gold solder must match the carat weight of the work, and alloy formulas are manufactured in most industry-standard carat weights to color match yellow and white gold.
  6. 6. GOLD RESOURCE Gold extraction can be the most economical in large, easily mined deposits. Ore grades as little as 0.5 mg/kg can be economical. Typical ore grade in the open-pit mines are 1-5 mg/kg while are grades in underground or hard rock are usually at least 3 mg/kg. Since the 18th Century, Witwatersrand Gold Rush located in South Africa discovery of some of the largest gold deposit in the world has ever seen. Other major producers are the United States, Australia, Russia and Peru. Mines in South Dakota and Nevada supply two-third of gold used in the United States. At the end of 2009, it was estimated that all the gold ever mined totaled 165000 ton.
  7. 7. GOLD RESOURCE China is the world’s largest producer of gold. Its production increased by 62% since 2001 while world output fell by 9.6% during the same period. The production rose from 285 to 300 ton of gold. Australia is the second largest gold producer in the world with 215 ton. It has been declined steadily since its peak in 1998. South Africa has lost it place of number 1 of gold production in 2007, now it’s the third largest in the world with the United States of America. It can produce of 215 ton of gold. Russia gold mines can produce 185 ton of gold. Peru can produce 180 ton of gold. Its production grew by 30.4% since 2001. Canada is the country of mining, not only for these abundant resources but all the half mines in the world are located here. This country contains geologist and mining engineers among the best in the world. Its production fell down since 1991 for 43% and increased by 5.2% in 2008. Canada produced 95 ton. Indonesia can produced 100 ton of gold; it increase of 66% by 2008 and decreased 23% compared to 2001.
  8. 8. GOLD SECURITY The comprehensive range of gold bullion bars can be refined up to 999.9, or even 999.99 purities and available from 400-ounce (12.5 kilograms). It accepted as ‘Good Delivery’ in all major markets worldwide. Sizes and purities of bars are matched to the special requirements of regional markets, fabricators or end users. All bars are subjected to rigorous inspections and weighing before packing and dispatch, as would be expected of the world’s perfectionist in precious metals.
  9. 9. GOLD SECURITY  Each 24K Gold Bar will be equipped with the certificate which each identical on the series number.  On the gold bar will be clearly identify the brand, certified assayer, gross weight, purity gold and identical series number.
  10. 10. GOLD SECURITY  This is the 24K Gold Bar that sell in Thailand, which the gross weight have been change to ‘Baht’. One ‘Baht’ is equal to 15.16 grams. The rest of gold bar will be stamp with the Brand, gross weight in Baht, certified assayer, and identical number. Each bar will come with the certificate from the assayer company.  The 24k gold bar with certificate can be sell worldwide, but gold bar that have a ‘Baht’ unit can be sell only in Thailand as it’s the one who use these unit in the world.
  11. 11. GOLD SPECIFICATION The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard. First, the gold specie standard is a system in which the monetary unit is associated with circulating gold coins, or with the unit of value defined in terms of one particular circulating gold coin in conjunction with subsidiary coinage made from a lesser valuable metal.
  12. 12. GOLD BAR PURITIES Gold Bar Purities percentage100 99 98 97 Gold Bar Purities percentage 96 95 94 Dubai Iran Hong Kong Thailand
  13. 13. THE FLUCTUATING GOLD MARKET AND PRICE OF GOLD The fluctuation of Gold prices can also be influenced by how expensive it is to explore for and develop gold to produce the product needed for selling gold or make it into sellable gold jewelry. Because of the constant fluctuating costs of things like oil and staffing, as the cost to mine the gold fluctuates, so will the value of the gold produced. Considering the high rate of oil prices, mining for gold on a large scale would be very detrimental to the economy because it would cost entirely too much to mine for. Therefore, if one keeps in mind the cost of other economic resources then it is easier to predict the value of gold.
  14. 14. PREVIOUS GOLD PRICE Gold is an Asset Gold Prices are usually denominated in US Dollars Gold prices are linked to the value of US Dollars Historical relationships Gold Price Forecast
  15. 15. MAIN GOLD MARKET SWITZERLAND. The term Suisse or Swiss gold bars refers to some of the finest, purest and highest quality gold bullion bar products manufactured in Switzerland. They enjoy worldwide recognition, have been traded on international gold bullion markets for decades and are popular amongst investors seeking to profit from the current gold Bull Run. One of the most important reasons why Suisse gold bars are highly regarded and trusted around the world is because they are manufactured in gold refineries that have met strict quality controls established
  16. 16. TRADING GOLD STRATEGY With the price of gold hitting all time highs many traders are wondering if gold trading is a great way to be able to make additional profits. One way that this can be done is through the trading of the gold futures contract. This is where you are speculating that the price of gold will rise or fall in the future. Historically speaking gold has been a great long term investment during times of economic uncertainty or crisis.
  17. 17. PUSH AND PULL GOLD MARKETING STRATEGIES 1. Push strategy A push promotional strategy involves taking the product directly to the customer via whatever means to ensure the customer is aware of your brand at the point of purchase. "Taking the product to the customer" 2. Pull strategy A pull strategy involves motivating customers to seek out your brand in an active process.
  19. 19. HOW GOLD TRADE IN THAILAND FUTUREEXCHANGE MARKET There have 2 main transaction in Thailand future exchange market  Trading Procedure Investors can trade TFEX’s products by placing orders via their brokers which are TFEX members (Members).  Trading system All TFEX’s derivatives contracts are executed, cleared and settled electronically through the integrated trading and clearing platform. The state-of- the-art technology solutions are the latest development of NASDAQ OMX Market Technology. NASDAQ OMX Market Technology has successfully developed derivatives exchange trading platform in 26 countries worldwide including North America, Europe and Asia region. The platform can support various types of exchange-traded derivatives contracts, including futures and options. It also supports different types of orders, including combination or spread orders. These built-in features facilitate investors’ need to execute transactions with advanced strategies.
  20. 20. HOW GOLD TRADE IN THAILAND FUTUREEXCHANGE MARKET There are two trading methods. 1. Electronic Trading Transaction 2. Block Trading Transaction
  22. 22. MARGIN AND MARK-TO-MARKET Under the TCH’s clearing rules, all traded futures contracts must be cleared and settled on the next business day (T+1). Each futures contract traded on the TFEX will be marked to the market daily based on the futures settlement price. An investor is required to maintain a margin account with a broker and a clearinghouse member is required to maintain a margin account with the clearinghouse. The clearinghouse will stipulate the margin rate and then will re-evaluate the margin requirements for each member’s base on a daily basis. For a client, when opening an account to trade futures, a broker will ask an investor for an initial deposit to cover the initial margin for each contract to buy or sell. At the end of each day, the broker marks-to-market the investor’s open futures positions. This is the process by which the broker will add and/or deduct gains and losses from the account’s balance. If client’s margin deposit falls below a certain level (as determined by the broker) the broker will then ask the investor to deposit additional money into the account to bring the margin back up to the required minimum. This is called a variation margin. In the event that the client has made a profit from his/her futures position, the client is then able to withdraw the money from the account.
  23. 23. WHY GOLD IS THE GOOD INVESTMENTCOMPARED TO OTHER ASSET People accept When in crisis gold will have value more than other asset Less risk compare with stock Return on asset higher than other asset Can keep for long time
  24. 24. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE The price of gold has increased a stunning 400% in the last decade and 26% on 2010 alone, trading today (9/11/11) at $1843.60 in the 24-hour New York spot gold price [1], which is the most commonly cited gold price. What makes this interesting is that traditionally gold has been considered a very low risk and low expected return investment that has been used merely to balance some of the risk in an investors’ portfolio. Meanwhile, at the beginning of the new millennium, we have been living, and continue to live, in times of great political and economical uncertainty on a global scale. In this chapter it will be studied what kind of uncertainties have had an effect on the demand of gold as an investment and the price of gold, and what is the rationale behind this. [2]
  25. 25. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE The actual demand of gold and gold products as such has been steadily increasing in the past decade. The increase in this demand is however been relatively slow and can’t really alone explain the high price. There is also a theory of price manipulation that stipulates that the price of gold has been suppressed artificially low by the banks and the governments for the past two decades. Arguably the central banks actually hold only about half the amount of gold they have reported and secretly sold the other half to the market, which would prevent the prices from rising to their actual value. This theory has however not been proved and therefore can’t either explain the high price of gold. Now we can finally go in to the subject of global financial and political crises and their implications on gold price. [3]
  26. 26. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE A very simple, yet a valid relation between global crises and the price of gold is that when everything else in the markets is falling, gold price goes up. This is mainly because investors believe that gold will maintain its value when the prices of other commodities are falling and the interest rates remain low. Perhaps the single biggest factor that drives people to invest in gold is however that today the price of paper currency is so volatile. Financial crises actually affect mostly to the value of paper currency, which in turn affects the price of gold. The main reasons that affect the price of paper currency are as follows. Political unrest Economic depression Rising Inflation
  27. 27. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE As mentioned in the first paragraph of this chapter, this has truly been a decade of financial and political crises, which some argue that started from the 9/11 terrorist attacks. At the beginning of the millennium we also witnessed the burst of the IT- bubble, which caused the value of the technology stocks to crash. Many people already at that time turned to investing in gold. In 2008, the subprime crisis crashed the stock markets again and this time the crash was even worse. The world economy is still getting over. the crisis and especially the U.S economy is having major problems as the government debt and the unemployment figures are going through the roof. Also the Euro zone has been dealing with big problems as some of the southern countries such as Greece, Italy and Portugal have been piling up the national debt up to a brink of default. The rising concerns of big European economies defaulting has yet again made gold a more interesting investment option as the markets are at risk to take another tailspin. It remains to be seen if these risks actually realize. Some of the most recent events and the implicated effect on the price of gold are illustrated in Figure 1 and explained as follows. [5]
  28. 28. FIGURE 1: RECENT EVENTS THAT HAVE HAD ANIMPACT ON GOLD PRICE [6]  Figure 1 highlights some interesting events in the U.S such the cutting of the U.S debt rating, which instantly raises the price of gold. Then again the two other events in the figure highlight the raise of debt ceiling and the extension of low interest rate periods
  29. 29. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE Now, these events can be considered as positive news in terms of avoiding an economical meltdown. However the reaction in the markets is still that the price of gold is going up, only with increased volatility. This is mainly because that even if the meltdown was avoided, there remain high risks of an economic disaster as both the Euro zone and the U.S are crumbling. However this just goes to show that not always good or bad news have the expected effect on gold price. [6] Now, how can we use this information to figure out if and when one should invest in gold spot or the futures market? Well, we have to predict where the gold price is going to move and is there going to more economic disasters or not. It can be expected that a major crisis will raise the price of gold, while if such crises can be avoided and the financial markets stabilize, we can expect the demand, and thus the price of gold to fall. Most experts at the moment believe that the price of gold is still going to rise to at least $2000 an ounce, while some experts have even made wild predictions that the U.S government will lose control of the dollar, which would skyrocket the gold price anywhere from $5000 up to $10000. Then there are also skeptics who believe the current gold price is nothing but another bubble waiting to burst. They claim that everybody is just following suit and investing in gold blindly and that the hype has raised the price much higher than the actual value is. The bubble could then burst when the financial situation calms down and the interest rates go up. But of course if everybody believed that gold would be worth at least $2000 dollars an ounce, it would already be traded at that price in the stock markets, according to the theory of perfect capital markets. [2]
  30. 30. THE IMPACT OF FINANCIAL AND POLITICAL CRISESON GOLD PRICE So in conclusion, is gold a good investment? Well it depends on your investment strategy and the amount of risk you are willing to take. Gold is clearly no longer a low risk investment with the increased price volatility and the suspicions of a price bubble. So you may now want to have it as the risk balancing investment in your portfolio and keep in mind that you also need to diversify to some low risk investments as well. I personally think that it could be a good idea to have some portion of your assets invested in gold since it is very likely that there’s going to be more financial and political crises in the near future and the gold price will continue going up. One thing is for certain though; if you know that Greece or the U.S will default tomorrow and no one else knows it, invest your money in gold today.