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Investing in gold a study

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Investing in gold a study

  1. 1. Investing in Gold-A studyPuneet Arora-75141Shantanu Vashishth-75150Teacher-Ms. Vibhuti VashishthBFIA 2B
  2. 2. Contents• Investment Channels• Factors affecting Gold prices in India• Evaluating performance of Gold
  3. 3. Investment ChannelsGold coins & barsAccountsExchange Traded ProductsCertificatesDerivatives,CFDs and spread bettingsMining CompaniesContents
  4. 4. Gold bars & coins most traditional way of investing in gold is by buying bulliongold bars these can easily be bought or sold at the major banks orfrom bullion dealers gold bars carry lower premium over spot price than goldcoins. larger bars carry an increased risk of forgery. The Krugerrand is the most widely-held gold bullion coin,with 46,000,000 troy ounces (1,400 tonnes) in circulation.
  5. 5. AccountsGold bullion banks offer two types of gold accounts -allocated and unallocated:1. Allocated account2. Unallocated accountOther opportunities for smaller investors include:1. Gold pool accounts2. Electronic currencies
  6. 6. Exchange Traded Productsinclude ETFs, ETNs, and CEFs which are traded like shareson the major stock exchanges.Gold ETPs represent an easy way to gain exposure to thegold price, without the inconvenience of storing physical bars.Typically a small commission is charged for trading in goldETPs and a small annual storage fee is charged.The annual expenses of the fund such as storage,insurance, and management fees are charged by selling asmall amount of gold represented by each certificate, so theamount of gold in each certificate will gradually decline overtime.
  7. 7. CertificatesGold certificates allow gold investors to avoid the risks andcosts associated with the transfer and storage of physicalbullion (such as theft, large bid-offer spread, and metallurgicalassay costs)It entails taking on a different set of risks and costs associatedwith the certificate itself (such as commissions, storage fees,and various types of credit risk).
  8. 8. Mining Company
  9. 9. Factors affecting gold prices inIndiaInternational prices.Interest rates.Dollar-Rupee DynamicsCentral Banks ReservesDemand for the metalGold ProductionThe changes in the CME restrictions.
  10. 10. Central Bank ReservesBack
  11. 11. Back
  12. 12. Demand for the metalBack
  13. 13. Data source: Gems and Jewellery Export Promotion Council
  14. 14. Gold ProductionBack
  15. 15. Evaluating performance ofGold3-year weekly return correlation on key commodities andgold1-year annualised daily return volatility on key commoditiesand gold22-day rolling annualised daily return volatility on gold andS&P GSPerformance of gold v/s other metalsPerformance of gold v/s other commoditiesGold and S&P(% year charts)Gold & Trade-weighted US dollarGold v/s Sensex
  16. 16. 0.470.530.450.15-0.010.210.350.450.470.660.480.73-0.2 0.0 0.2 0.4 0.6 0.8 1.0R/J CRB Commodity IndexDJ UBS Commodity IndexS&P GS Commodity IndexDJ UBS Softs IndexDJ UBS Livestock IndexDJ UBS Grains IndexDJ UBS Energy IndexBrent crude oil (US$/bbl)DJ UBS Industrial IndexPlatinum (US$/oz)Palladium (US$/oz)Silver (US$/oz)CorrelationNotes: Data ending 28 September 2012Source: Bloomberg, LBMA, LME, World Gold CouncilChart: 3-year weekly return correlation on key commodities and gold
  17. 17. 0510152025303540DJUBSLivestockIndexGold(US$/oz)R/JCRBCommodityIndexDJUBSCommodityIndexS&PGSCommodityIndexPlatinum(US$/oz)DJUBSSoftsIndexCopperLME(US$/t)AluminumLME(US$/t)ZincLME(US$/t)NickelLME(US$/t)Brentcrudeoil(US$/bbl)Palladium(US$/oz)LeadLME(US$/t)DJUBSEnergyIndexSilver(US$/oz)DJUBSGrainsIndexTinLME(US$/t)%Notes: Data ending 28 September 2012Source:Bloomberg, LBMA, LME, World Gold CouncilChart: 1-year annualised daily return volatility on key commodities and gold (US$)
  18. 18. 0102030405060708010/2002 04/2004 10/2005 04/2007 10/2008 04/2010 10/2011%Gold (US$/oz) S&P GS Commodity IndexNotes: Data ending 30 September 2012Source:Bloomberg, World Gold CouncilChart: 22-day rolling anualized daily return volatility on gold and S&P GS
  19. 19. Gold(US$/oz)Silver(US$/oz)Palladium(US$/oz)Platinum(US$/oz)AluminumLME (US$/t)Copper LME(US$/t)Lead LME(US$/t)Nickel LME(US$/t)Tin LME(US$/t)Zinc LME(US$/t)1-month 7.0% 13.0% 3.1% 10.1% 12.1% 8.6% 17.2% 13.8% 11.5% 13.9%3-month 14.0% 29.2% 13.0% 19.6% 14.3% 11.4% 30.0% 13.1% 14.9% 16.0%6-month 7.1% 9.0% -1.0% 2.1% -0.6% -1.1% 15.6% 6.4% -3.1% 5.1%1-year 10.1% 14.8% 2.9% 9.2% -4.2% 18.5% 14.7% 0.3% 5.1% 11.6%3-year 78.4% 110.6% 115.9% 28.0% 13.1% 34.7% 1.1% 6.8% 43.4% 9.1%5-year 139.0% 153.8% 83.6% 20.0% -14.1% 1.3% -33.4% -40.3% 42.0% -31.7%3y CAGR 21.3% 28.2% 29.2% 8.6% 4.2% 10.5% 0.4% 2.2% 12.8% 3.0%5y CAGR 19.0% 20.5% 12.9% 3.7% -3.0% 0.3% -7.8% -9.8% 7.3% -7.4%Performance of Gold V/s Other metals
  20. 20. Column1 Gold (US$/oz)Brent crude oil(US$/bbl)DJ UBSEnergy IndexDJ UBS GrainsIndexDJ UBSLivestockIndexDJ UBS SoftsIndexS&P GSCommodityIndexDJ UBSCommodityIndexR/J CRBCommodityIndex1-month 7.0% -0.1% 4.0% -4.9% -2.1% -0.3% -1.4% 1.7% -0.1%3-month 14.0% 23.9% 18.9% 13.5% -5.3% -0.3% 11.9% 9.5% 8.9%6-month 7.1% -8.3% 1.6% 25.5% -3.9% -13.8% -3.9% 3.3% -0.9%1-year 10.1% 6.4% -4.8% 38.4% -11.4% -22.9% 13.8% 5.9% 4.4%3-year 78.4% 67.4% -25.9% 75.7% 4.4% 22.7% 23.1% 19.9% 22.7%5-year 139.0% 42.6% -61.4% 19.9% -45.9% 18.2% -23.3% -13.5% -3.2%3yCAGR 21.3% 18.7% -9.5% 20.7% 1.4% 7.1% 7.2% 6.2% 7.0%5yCAGR 19.0% 7.4% -17.3% 3.7% -11.6% 3.4% -5.2% -2.8% -0.6%Performance of Gold & othercommodities
  21. 21. 010020030040050060070010/2002 10/2004 10/2006 10/2008 10/2010Index levelGold (US$/oz) S&P 500Notes: Data ending 30 September 2012Source:Bloomberg, World Gold CouncilChart 5: Gold and S&P 500 in US$ (2 Sep 2002=100)
  22. 22. 010020030040050060070010/2002 10/2004 10/2006 10/2008 10/2010Index levelGold (US$/oz) Trade-weighted US$Notes: Data ending 30 September 2012Source:Bloomberg, World Gold CouncilChart 6: Gold (US$/oz) and the trade-weighted US dollar
  23. 23. 010203040506070809010010/2002 04/2004 10/2005 04/2007 10/2008 04/2010 10/2011%Gold (US$/oz) S&P 500Chart 4: 22-day rolling anualized daily return volatility on gold and S&P 500 (US$)Notes: Data ending 30 September 2012Source:Bloomberg, World Gold Council
  24. 24. Gold v/s Sensex

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