commodity trading analysis technique in GOLD

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A
Project report on
“Commodity Trading Analysis Technique For Gold ”
Dissertation Submitted to the
ASM IBMR Chinchwad,Pune University
in partial fulfillment of the requirements for the award of the Degree of
MASTERS IN BUSINESS ADMINISTRATION
IN FINANCE
Submitted by:
Vaibhav V.Belkhude
Research Guide:
Prof. Priya Tiwari
SAVITRIBAI PHULE PUNE UNIVERSITY

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DECLARATION
I hereby declare that the dissertation “Commodity Trading Analysis
Technique For Gold ” submitted for the MBA FINANCE Degree at ASM
IBMR Chinchwad,Pune University Department of Business Management is my
original work and the dissertation has not formed the basis for the award of any
degree, associate ship, fellowship or any other similar titles.
Place: PUNE
Date: Vaibhav V.Belkhude

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ACKNOWLEDGEMENT
Working on this project has presented with many insights and challenges. This
project would not have been the same without the dedicated guidance of my
project guide Prof.PRIYA TIWARI , Lecturer, Department of Business
Management, ASM IBMR Chinchwad Pune University, I thank her for her
support and patience.
This project is a synergistic product of many minds. Therein, I take this
opportunity to express my profound appreciation to everyone who has directly
or indirectly helped me in the successful completion of this project.
The project would not been completed without their support and guidance.
Thanking them is a small gesture for the generosity they showed. It was a
great learning experience to work on such a project.
Place: Pune
Date:
Signature of the student

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PREFACE
“Experience is the best teacher.” This saying is very well applicable in everyone’s
life. Therefore as a student of management it must apply to me also. Then the
question arises that from where we can get this experience. Obviously we must
undergo study on commodity trading analysis. To serve this purpose I have done
Commodity trading analysis in gold and silver through the various sources
available and as an outcome I have prepared this
In today’s corporate and competitive world, I find that in commodity trading has
good growth and potential. Study of Commodity trading analysis in gold and
silver has given me the opportunity to work and get experience in a highly
competitive and enhancing sector.

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Table of contents
Sr.no. Contents Page NO.
1 Executive summery 6
2 Literature review 7
3 Objectives of study 9
4 List of tables 10
5 Introduction 11
6 Commodity derivatives 17
7 methodology 29
8 Data Analysis 39
9 conclusion 47
10 bibliography 48

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1. Executive summary
Any product which exists naturally and serves as an input for the secondary market can be
described as a commodity. They can be classified as agricultural products like cotton, wheat,
pepper etc. or non-agricultural products like crude oil, gold, and copper and so on.
Agricultural products are prone to spoilage and their availability is dependent on weather
condition; their market is more volatile. Non-agricultural products etc like oil, copper are
useful in industries (for producing derived or secondary products) and are generally preferred
by investors.
For a product to be classified as a commodity it should have a commercial value; all
commodities are not traded in the commodities market. Commodities are fungible which
means they are same irrespective of who produces it and are processed further into other
products.
“The Present Study on Commodity market” compares and price movement of the market.
3 commodities like Gold, Silver, Copper, Collected the prices from MCX, NCDEX.
Commodities purely depend on demand and supply, but it’s observed that gold
depends on US dollar, Silver depends on Gold, and Copper depends on Demand.
US Dollar increase gold price increase, US dollar decrease price of the gold is
decrease.
Gold increase 1 tics silver decrease 11 tics, Gold decrease 1 tics Silver increase
10 tis.
Copper purely depends demand and supply.

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Literature review
Technical analysts argue that their methods take advantage of market psychology as illustrated by
the quotation from Pring (1991) above. In particular, technical textbooks such as Murphy (1986) and
Pring (1991) outline three principles that guide the behavior of technical analysts. The first is that
market action (prices and transactions volume)
“discounts” everything. In other words, an asset’s price history incorporates all
relevant
information, so there is no need to forecast or research asset “fundamentals.” Indeed, technical
purists don’t even look at fundamentals, except through the prism of prices, which
reflect fundamentals before those variables are fully observable. Commodity markets are asset
markets where market players buy for use and sell for gain. Commodity markets are complex
because many factors play a role in relation to their costs. Such factors include the weather,
inventories, supply, demand, and technology (Baffes,2013). Over the recent decade, commodity
markets have often been in the spotlight due to a high amount of volatility in the markets, but as
mentioned the interest is not new. Ludwell Moore (1921) examined the existence of cycles through
history, and did find some evidence of cycles. However, he did not find anything that could predict
either the length or depth of those cycles in commodity markets. As other following studies have
shown, commodity markets have been volatile and appearing to be random. Nevertheless, that has
not prevented the popularization of technical analysis tools that are thought to be able to predict
future movements in commodity prices (Bundgaard, 2013), which is what any procurement function
would like to be able to do as argued above. Consequently, this paper aims at helping companies at
least understand whether they can use technical analysis as a reliable predictor of future movements
or if commodity markets truly do behave in a random fashion. It is relatively easy to highlight
situations where arbitrage cannot be traded away in commodity markets. First of all, national
policies and regulations may create such high transaction costs for certain commodities (Zapoleon,
1931; Caine, 1958). there may not beany open market where a commodity is traded. If the
commodity is not traded, it is obviously impossible to trade away arbitrage opportunities.
Nevertheless, there are commodities which are somewhat freely and openly traded across the globe
(Baffes &Haniotis, 2010; Baffes, 2013). By choosing those commodities, and avoiding commodities
that are prone to non-random shocks, e.g. oil and its dependence on OPEC policies, it can plausibly
be considered that arbitrage opportunities should be traded away in the market data.

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OBJECTIVE OF THE STUDY
• To study and understand the price movements and make profit in gold.
• To study and understand how can hedging helpful in risk management
in gold contracts.
• To study analyzed the technical indicator and providing protection our
Investment.
• to study and analyzed fundamental data how can help you predicting
future value.

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List of Tables
Table 1.1 Registered Commodity Exchanges in India Table
1.2 Commodities Traded over the Exchanges Table 3.1
Contract Specification for e-series products
Table 3.2 The market timings for trading on the online platform of the Exchange
(NSEL) are as under
Table 3.3 Difference & Similarities between MCX and NCDEX Table
3.4 Contract Specification (MCX) Table 3.5 Contract Specification
(NCDEX)

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Introduction
Commodity markets are markets where raw or primary products are exchanged. These raw
commodities are traded on regulated commodities exchanges, in which they are bought and
sold in standardized contracts.
Commodity market is an important constituent of the financial markets of any country. It is the
market where a wide range of products, viz., precious metals, base metals, crude oil, energy
and soft commodities like palm oil, coffee etc. are traded.
History of Commodity Trading
Commodity futures’ trading has been first recorded in the 17
t h
century in Japan. The futures’
trading was basically done with the seasonal agricultural products so as to ensure their continuous
supply all the year around. Japanese merchants used to store rice in the warehouses for their future
use and used to sell receipts against such stored rice. These receipts were called as ‘rice tickets
‘which then eventually became the basis for their commercial currency. The rules which were
established during this time for trading these rice tickets are similar to the rules set for American
futures trading. In the United States, the commodity futures trading first started in the middle of
the 19
t h
century with the help of the Chicago Board Of Trade set up in the year 1848.Gradually
then about 10 commodity exchanges were set up with a wide variety of agricultural products being
traded. Commodity derivative market first started in India in cotton in the 1875 and in the oilseeds
in 1900 at Bombay.
Forward trading in raw jute and jute goods started at Calcutta in the year 1912.
But however, within few years of their establishment, the forwards trading in these
commodities was banned in the year 1960. Recently, in the year 2003, such ban on trading was
lifted and the trading in commodity futures was started. Permission was given to establish online
multi-commodity exchange in order to facilitate trading. The long period of prohibition of
forward trading in major commodities like cotton and oilseeds complex has an enduring impact
on the development of the commodity derivative markets in India and the futures market in
commodities find themselves left far behind the derivative
markets in the developed countries, which have been functioning uninterruptedly. Thus, today
the challenge before the commodity markets is to make up for the loss of growth and
development during the three decades of government policies, which had the effect of restricting
the growth of the derivative markets.

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Evolution of the Commodity Market in India
Derivatives as a tool for managing risk first originated in the commodities markets. They were
then found useful as a hedging tool in financial markets as well. In India, trading in commodity
futures has been in existence from the nineteenth century with organised trading in cotton
through the establishment of Cotton Trade Association in 1875. Over a period of time, other
commodities were permitted to be traded in futures exchanges. Regulatory constraints in 1960s
resulted in virtual dismantling of the commodities future markets. It is only in the last decade
that commodity future exchanges have been actively encouraged. However, the markets have
been thin with poor liquidity and have not grown to any significant level.
Bombay Cotton Trade Association Ltd., set up in 1875, was the fir st organized futures market.
Bombay Cotton Exchange Ltd. was established in 1893 following the widespread discontent
amongst leading cotton mill owners and merchants over functioning of Bombay Cotton Trade
Association. The Futures trading in oilseeds started in 1900 with the establishment of the
Gujarati Vyapari Mandali, which carried on futures trading in groundnut, castor seed and
cotton. Futures’ trading in wheat was existent at several places in Punjab and Uttar Pradesh.
But the most notable futures exchange for wheat was chamber of commerce at Hapur set up in
1913. Futures trading in bullion began in Mumbai in 1920. Calcutta Hessian Exchange Ltd.
was established in 1919 for futures trading in raw jute and jute goods. But organized futures
trading in raw jute began only in 1927 with the establishment of East Indian Jute Association
Ltd. These two associations amalgamated in 1945 to form the East India Jute & Hessian Ltd.
to conduct organized trading in both Raw Jute and Jute goods. Forward Contracts (Regulation)
Act was enacted in 1952 and the Forwards Markets Commission (FMC) was established in
1953 under the Ministry of Consumer Affairs and Public Distribution.
• The majority of the committee recommended that futures trading be introduced in the
following commodities:
1. Basmati Rice
2. Cotton
3. Raw jute and jute goods
4. Groundnut, rapeseed/mustard seed, cottonseed, sesame seed, sunflower seed, safflower
seed, copra and soybean, and oils and oilcakes of all of them.
5. Rice bran oil
6. Castor oil and its oilcake

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7. Linseed
8. Silver
9. Onions
The liberalized policy being followed by the government of India and the gradual
withdrawal of the procurement and distribution channel necessitated setting in place a market
mechanism to perform the economic functions of price discovery and risk management.
The national agriculture policy announced in July 2000 and the announcements in the
budget speech for 2002-2003 were indicative of the government’s resolve to put in place a
mechanism of futures trade/market. As a follow up, the government issued notifications on
1.4.2003 permitting futures trading in the commodities, with the issue of these notifications
futures trading is not prohibited in any commodity. Options’
Different Segments in Commodities Market
The commodities market exits in two distinct forms namely
Over the Counter (OTC) market
The Exchange based market
Also, there exists the spot and the derivatives segment. The spot markets are essentially over
the counter markets previously and the participation is restricted to people who are involved
with that commodity say the farmer, processor, wholesaler etc. But, now-a-days exchange-
based spot market has come into existence. National Spot Exchange provides spot trading of
commodities. Derivative trading takes place through exchange-based markets with
standardized contracts, settlements etc.

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Commodity Exchanges in India
Commodity exchanges are places which trade in particular commodities, neglecting the trade
of securities, stock index futures and options etc. Exchanges are the centralized places which
provide a platform for both the buyers and the sellers to meet, set quality standards and
establish the rules of businesses. Commodity exchanges in India plays an important role as it
offers a tool for efficient risk management and price transparency.
In India, there are about 25 recognized regional exchanges of which five are national level
multi-commodity exchanges. These five national level multi-commodity exchanges are,
➢ National Board of Trade
➢ National Commodity and Derivative Exchange Limited( NCDEX)
➢ Multi-Commodity Exchange Of India( MCX)
➢ National Multi-Commodity Exchange Of India Limited ( NMCEIL)
➢ National Spot Exchange Limited(NSEL)
All the above exchanges have been set up under the overall control of Forward Market
Commission of Government of India.
National Commodity & Derivative Exchange Limited (NCDEX)
National Commodity & Derivative Exchange Limited (NCDEX) located in Mumbai is a public
limited company incorporated on April 23, 2003 under the Companies Act, 1956 and had
commenced its operations on December 15, 2003. This is the only commodity exchange in the
country promoted by the national level institutions. It is
promoted by Life Insurance Corporation of India (LIC), National Bank for Agriculture and
Rural Development (NABARD) and National Stock Exchange (NSE). Other shareholders are
Canara Bank, Punjab National Bank (PNB), CRISIL Limited, Indian Farmers Fertiliser
Cooperative Limited (IFFCO), Goldman Sachs, Intercontinental Exchange (ICE), Shree
Renuka Sugars Limited and Jaypee Capital Services Limited.
It is a professionally managed online multi- commodity exchange. NCDEX is regulated by
Forward Market Commission and is subject to various law of land like the Companies Act,
Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other
legislations.
The Exchange, as on May 21, 2009 when Wheat Contracts were re- launched on the Exchange
platform, offered contracts in 59 commodities - comprising 39 agricultural commodities, 5

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base metals, 6 precious metals, 4 energy, 3 polymers, 1 ferrous metal, and CER. The top 5
commodities, in terms of volume traded at the Exchange, were Rape/Mustard Seed, Gaur Seed,
Soyabean Seeds, Turmeric and Jeera.
Multi Commodity Exchange of India Limited (MCX)
Multi Commodity Exchange is headquartered in Mumbai and is an independent, de-mutualized
exchange with the permanent recognition from Government of India. Key Shareholders of
MCX are Financial Technologies (India) Ltd., State Bank of India and its associates, National
Bank for Agricultural and rural Development (NABARD), National Stock Exchange of India
Ltd (NSE), Fid Fund (Mauritius) Ltd. - an affiliate of Fidelity International, Union Bank of
India, Corporation Bank, Bank of India, Canara Bank, HDFC Bank, SBI Life Insurance Co.
Ltd., ICICI ventures, IL&FS, Merrill Lynch and New York Stock Exchange. MCX facilitates
online trading, clearing and settlement operations for commodity futures market across the
country.MCX started offering trade in November 2003 and has several strategic alliances with
leading exchanges across the globe. It has built strategic alliances with Bombay Bullion
Association, Bombay Metal Exchange, Solvent Extractors’ Association of India, Pulse
Importers Association and Shetkari Sanghatana.
It is regulated by the Forward Markets Commission. MCX is India's No. 1 commodity
exchange with 83% market share. The exchange's main competitor is National Commodity &
Derivatives Exchange Ltd. Globally; MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in
crude oil and gold in futures trading. The highest traded item is gold.
Now reaches out to about 800 cities and towns in India with the help of about 126,000 trading
terminals. MCX COMDEX is India's first and only composite commodity futures price index.
National Multi-Commodity Exchange of India Limited (NMCEIL)
National Multi-Commodity Exchange of India Limited (NMCEIL) is the first de-mutualized,
electronic Multi-commodity Exchange in India. It is one and only one Commodity exchange
in the world to obtain the prestigious ISO 9001:2000 certification awarded by the British
Standard Institutions (BSI). NMCE not only revived futures trade electronically in the
commodities in India after a gap of 41 years, but also integrated the centuries old commodity
market with the latest technology. It is backed by compulsory delivery based settlement to
ensure transparent and fair trade practices. NMCE offers electronic platform for future trading
in plantation, spices, food grains, non-ferrous metals, oil seeds and their derivatives.
On 25
th
July, 2001, it was granted approval by the government to organize trading in the edible
oil complex. It has been operationalized from November 26, 2002.

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It is promoted by Central Warehousing Corporation (CWC), Punjab National Bank (PNB),
National Agricultural Cooperative Marketing Federation of India (NAFED), Gujarat Agro-
Industries Corporation Limited (GAICL), Gujarat State Agricultural Marketing Board
(GSAMB), Neptune Overseas Limited (NOL), National Institute of Agricultural Marketing
(NIAM). It has got its recognition in October 2002.
National Spot Exchange Limited
National Spot Exchange Ltd (NSEL) is an electronic, demutualized commodity spot market.
The Exchange is promoted by Financial Technologies (India) Ltd (FTIL) and National
Agricultural Cooperative Marketing Federation of India Limited (NAFED). It provides an
electronic, transparent, well organized and centralized trading platform
with the facility to access and participate in the market remotely. It facilitates risk free and
hassle free purchase and sell of quality and quantity specified commodities to commodity
market participants including farmers, traders, processors, exporters, importers, arbitrageurs,
investors and the retail market participants. Exchange also offers various other services such
as quality certification, warehousing, warehouse receipt financing, etc.
NSEL commenced its live operations on 15th October 2008. The Exchange has started trading
in Pre-certified cotton bales for Mumbai delivery, Imported Gold bar and silver bar for
Ahmedabad delivery from the day one and now has added number of commodities for the spot
trading. Its stated mission is to develop a Common Indian Market, by setting up a national level
electronic spot market and providing a state of art trading, delivery and settlement facilities in
various commodities, which can be accessed from across the country.
It has created efficient spot delivery platform, helping the sellers/producers to sell
commodities directly to the end buyers comprises of processors/ exporters. Currently, NSEL
holds a market share of over 98% of the Indian electronic commodity Spot market, and has
more than 495 registered members operating through over 3000 trader work stations, across
India. Government organizations like FCI, HAFED, MMTC, PEC, NAFED, APMARKFED,
RAJFED, and CCI have been actively utilizing the Exchange platform for selling various
commodities. More t han 33 commodities are traded on NSEL Platform having delivery
locations spread across 14 states.
For the first time in India, NSEL has introduced demat delivery based instrument products
called e-Series, in commodities like gold, silver, copper, zinc and lead. This is a unique market

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segment, which is functioning just like cash segment in equities, but offering commodities in
demat form in smaller denominations.
Salient Features
On spot exchange single day contracts are traded.
It provides intra day trading with settlement of obligation on net basis.
All positions outstanding at end of the day should result into compulsory delivery.
Demat delivery facility is available .
Fungibility of delivery between National Spot Exchange and MCX with common ICIN
nos is possible.
Loan facility against pledge of demat / warehouse receipt all deliverable futures
contracts, including agri commodities, gold, silver, non-ferrous metals and wide
number of other industrial products to be launched.
Table 1.1 Commodities Traded over the Exchanges
Bullion Gold and Silver
Oil
Oilseeds
& Castor Seeds, Soya Seeds, Castor Oil, Refined Soya Oil, Soya meal, Crude Palm Oil,
Groundnut Oil, Mustard Seed, Cotton Seed Oil Cake, Cottonseed.
Spices Pepper, Red Chilly, Jeera, Turmeric, Cardamom
Metals Steel Long, Steel Flat, Copper, Nickel, Zinc, Tin, Steel, Aluminum,Lead
Fibre Kapas, Long Staple Cotton, Medium Staple Cotton
Pulses Chana,Urad,Yellow Peas, Tur,
Grains Rice, Basmati Rice, Wheat, Maize, Sarbati Rice, Jeera
Energy Crude Oil, Natural Gas, Brent Crude, Heating oil, Gasoline
others

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2. Commodity Derivatives
2.1 Derivatives
The term “derivatives” refer to financial instruments which derive their value from
some underlying assets. The underlying assets could be equities (shares), debt (bonds,
T-bills, and notes), currencies, commodities and even indices of these various assets,
such as the Nifty 50 Index. Derivatives derive their names from their respective
underlying asset. Here, in case of commodity derivatives the underlying asset is a
commodity. There are various types of derivatives traded on exchanges across India.
They are
❖ Forwards
❖ Futures
2.1.1 Forwards
A forward contract or simply a forward is a contract between two parties to buy or
sell an asset at a certain future date for a certain price that is pre-decided on the date of
the contract. The future date is referred to as expiry date and the pre-decided price is
referred to as Forward Price.
The party that agrees to buy the asset on a future date is referred to as a long investor
and is said to have a long position. Similarly the party that agrees to sell the asset in a
future date is referred to as a short investor and is said to have a short position. The
price agreed upon is called the delivery price or the Forward Price.
Forward contracts are traded only in Over the Counter (OTC) market and not in stock
exchanges. OTC market is a private market where individuals/institutions can trade
through negotiations on a one to one basis.
A drawback of forward contracts is that they are subject to default risk. There are
chances for one party to default, i.e. not honor the contract. It could be either the buyer
or the seller. This results in the other party suffering a loss. This risk of making losses
due to any of the two parties defaulting is known as counter party risk. The main reason
behind such risk is the absence of any mediator between the parties, who could have
undertaken the task of ensuring that both the parties fulfill their
obligations arising out of the contract. Default risk is also referred to as counter party
risk or credit risk.

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2.1.2 Futures
A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. But unlike forward contracts, the futures contracts
are standardized and exchange traded. To facilitate liquidity in the futures contracts, the
exchange specifies certain standard features of the contract. It is a standardized contract
with standard underlying instrument, a standard quantity and quality of the underlying
instrument that can be delivered, (or which can be used for reference purposes in
settlement) and a standard timing of such settlement. A futures contract may be offset
prior to maturity by entering into an equal and opposite transaction. More than 99% of
futures transactions are offset this way.
The standardized items in a futures contract are:
• Quantity of the underlying
• Quality of the underlying
• The date and the month of delivery
• The units of price quotation and minimum price change
• Location of settlement
3. Commodities Trading
3.1 Spot Trading
Earlier, commodity spot markets are essentially over the counter markets (OTC). OTC
is a private market. In these markets, individuals/institutions trade through negotiations
on a one to one basis. People who are in need of a commodity, buys the product from
those persons (farmer, processor, wholesaler etc) who had stock with them. The buyer
does the payment immediately on the spot and the seller handovers the product. Thus,
a spot market contract involves immediate payment and immediate transfer of asset.
Now –a –days, the face of commodity spot market is changing drastically. Electronic
spot exchanges have come into existence. Now, spot trading in commodities is similar
to equity spot trading that is cash segment of equity market. We have only one national
exchange in India where spot trading of commodities is allowed. It is National Spot
Exchange Limited (NSEL) which was set up in October, 2008. It is an electronic spot
exchange. It is India’s No.1 spot exchange having 99% market share, providing delivery
based trading platform in commodities (CashSegment in Indian Commodity Market).
Its promoters are Financial Technologies and National Agricultural Co-Operative
Marketing Federation of India Limited (NAFED).

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The products offered by NSEL are
1. Agricultural Products
Cereals: Paddy, Wheat, Bajra
Pulses: Bengal gram, Green Gram, Black gram, Pigeon Peas, Yellow Peas etc.
Edible Oils & Oilseeds: Soya bean, Castor Seed, Mustard Seed etc.
Cotton, sugar and Black Pepper.
2. Non Agricultural Products
Bullion: Gold & Silver (Bars & Coins)
Steel: Ignots and Billets
3. E-Series products
E-Gold
E-Silver
E- Copper
E-Zinc
E-Lead
.
3.1.2 E-series Products
E-series products provide facility to buy commodities in smaller
denominations. Whereas, in future market investor has to buy commodities in lot sizes.
For example, if an investor wants to buy copper, he has to buy 1 lot size i.e 1MT (metric
ton) on MCX. In spot market, he will be able to buy 50 kg of copper and hold in demat
account.
Features of E-series products
• Promotes Systemic investment and savings

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• Invest in smaller denomination (1 gm gold and 100 gm
Silver) •Transparent and uniform pan India pricing
•Convenient and secure online buying and selling
• No storage or holding costs
• Physical delivery of accumulated demat units at multiple centres available
• Extending trading hours from 9 am to 11.30 pm.
NSDL and CDSL act as the Depository for holding commodity units in the electronic
form, while the commodity in physical form is kept in the designated vault/storage.
NSEL is the issuer.
E-series products function just like cash segment in equities.
Retail investors, corporate can trade and invest in the instrument.
Only Authorized Dealers appointed by NSEL are eligible to demat and take care of all
compliance.
These products are eligible for off market transfer and pledge.
Physical conversion of accumulated demat units is possible at designated centres.
There are no storage / WR charges for storing of E-Series ICINs.
Advantages of commodity E-Series contract trading:
1. Holding commodities in demat form.
2. Retail investors can diversify their portfolio.
3. No worry for daily MTM pay in/pay out as in derivative market.
4. No risk of commodity custody/theft.

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GOLD:
Price Quotation Lot Size Margin
Mega 10 Gram 1 Kg 5%
Mini 10 Grams 100 Grams 5%
Guinea 8 Grams 8 Grams 5%
Petal 1Gram 1 Gram 5%
Table 3.2 The market timings for trading on the online platform of the Exchange
(NSEL) are as under
Products Monday to Friday Saturday
AGRI 09:00 to 18:00 09:00 to 14:00
NON-AGRI 09:00 to 23:30 09:00 to 14:00
Intraday
Contracts(Agri/non-agri) 09:00 to 16:00
E-series product 09:00 to 23:30
3.2 Futures Trading
There are many exchanges in India that provide trading in commodity futures. The
major exchanges that provide futures trading in commodities in India are MCX and
NCDEX.
A commodity futures market (or exchange) is, in simple terms, nothing more or less
than a public marketplace where commodities are contracted for purchase or sale at an
agreed price for delivery at a specified date. These purchases and sales, which must be
made through a broker who is a member of an organized exchange, are made under the
terms and conditions of a standardized futures contract. The primary distinction
between a futures market and a market in which actual commodities are bought and
sold, either for immediate or later delivery, is that in the futures market one deals in
standardized contractual agreements only. These agreements (more formally called
futures contracts) provide for delivery of a specified amount of a particular commodity
during a specified future month, but involve no immediate transfer of ownership of the
commodity involved.
In other words, one can buy and sell commodities in a futures market regardless of
whether or not one has, or owns, the particular commodity involved. When one deals
in futures one need not be concerned about having to receive delivery (for the buyer) or
having to make delivery (for the seller) of the actual commodity, providing of course
that one does not buy or sell a future during its delivery month. One may at any time
cancel out a previous sale by an equal offsetting purchase or a previous purchase by an

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equal offsetting sale. If done prior to the delivery month the trades cancel out and thus
there is no receipt or delivery of the commodity.
Actually, only a very small percentage, usually less than two percent, of the total futures
contracts that are entered into are ever settled through deliveries. For the most part they are
cancelled out prior to the delivery month in the manner just described
3.3 Delivery
1. Sellers and buyers have to convey intention on or before five days of the contract
expiry date.
The intentions are then matched and assigned by the Exchange with the corresponding
buyers. As is the case universally, seller has freedom to tender delivery during the delivery
period at any approved delivery centers. In other words, buyer cannot demand delivery at
delivery center of his choice.
When the seller gives intimation, a call is made to the corresponding buyer to whom the
delivery is assigned by the Exchange. Delivery margin is collected from both the buyer and
seller.
3. After matching the open positions of relevant buyer and seller, the same is
transferred from the system and settled at the closing price of the preceding day, so
that mark to market (MTM) is not levied or paid to the member.
4. Within five days from the position transfer, the buyer has to maintain the required
funds in their clearing & settlement account while the seller has to tender the
warehouse receipts to the exchange along with the computation of warehouse
charges. On the 3rd day, the exchange makes pay- in & payout simultaneously after
retaining the warehouse charges margin and sales tax margin from the buyer and
seller respectively.
5. After the completion of pay- in and payout, duly endorsed warehouse receipts are
sent to the buyer immediately.
6. Settlement of warehouse charges, margins and sales tax margins take place soon
after receipt of relevant documents (copies of sales bill, sales tax form) from the
member.

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Table 3.3 Difference & Similarities between MCX and NCDEX
MCX NCDEX
Contract Months Different for each Normally monthly
Commodity
Expiry Day Different for commodities 20
t h
of each contract
Month
Timing Summer (May to October) Summer (May to October)
:All Commodities : 10 AM : All Commodities : 10
to 11:30 PM. International AM to 5 PM. International
Commodities: Commodities:
5 PM to 11.30 PM. 5 PM to 11.30 PM.
Table 3.4 Contract Specification (MCX)
Commodity LTP Price Lot Margi Lot Appro Contract
Quotati Size n % Value(R x Months
On (Qty s) Margi
) / 1 n (Rs)
Rs
(+
& -)
GOLD 1770 10GRM 100 4% 1,770,00 70,800 Feb, April,
0 S 0 June, Aug,
Oct, Dec.
SILVER 2830 1KGS 30 5% 849,000 42,450 Mar, May,
0 July, Sep,
Dec.

Page NO: 26
4.Regulatory Board
Commodity exchanges in India are regulated by Forward Markets Commission.
Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory
authority which is overseen by the Ministry of Consumer Affairs, Food and Public
Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward
Contracts (Regulation) Act, 1952.
" The Act provides that the Commission shall consist of not less than two but not exceeding
four members appointed by the Central Government out of them being nominated by the
Central Government to be the Chairman thereof. Currently Commission comprises three
members among whom Shri B.C. Khatua, IAS, is the Chairman, Shri Ramesh Abhishek,
IAS and Shri D.S.Kolamkar, IES are the Members of the Commission."
The functions of the Forward Markets Commission are as follows:
(a) To advise the Central Government in respect of the recognition or the withdrawal of
recognition from any association or in respect of any other matter arising out of the
administration of the Forward Contracts (Regulation) Act 1952.
(b) To keep forward markets under observation and to take such action in relation to them,
as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
(c) To collect and whenever the Commission thinks it necessary, to publish information
regarding the trading conditions in respect of goods to which any of the provisions of the
act is made applicable, including information regarding supply, demand and prices, and to
submit to the Central Government, periodical reports on the working of forward markets
relating to such goods;
(d) To make recommendations generally with a view to improving the organization and
working of forward markets;

Page NO: 27
(e) To undertake the inspection of the accounts and other documents of any recognized
association or registered association or any member of such association whenever it
considerers it necessary.
(f) To perform such other duties and exercise such other powers as may be assigned to
the Commission by or under this Act, or as may be prescribed.
Powers of the Commission
(1) The Commission shall, in the performance of its functions, have all the powers of a
civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in
respect of the following matters, namely:
(a) Summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of any document;
(c) receiving evidence on affidavits;
(d) requisitioning any public record or copy thereof from any office;
(e) any other matters which may be prescribed.
(2) The Commission shall have the power to require any person, subject to any
privilege which may be claimed by that person under any law for the time being in force,
to furnish information on such points or matters as in the opinion of the Commission may
be useful for, or relevant to any matter under the consideration of the Commission and any
person so required shall be deemed to be legally bound to furnish such information within
the meaning of Sec. 176 of the Indian Penal code, 1860 (45 of 1860).
(3) The Commission shall be deemed to be a civil court and when any offence
described in Sections. 175, 178, 179, 180 or Sec. 228 of the Indian Penal Code, 1860 (45
of 1860), is committed in the view or presence of the Commission, the Commission may,
after recording the facts constituting the offence and the statement of the accused as
provided for in the Code of Criminal Procedure, 1898 (5 of 1898) forward the case to a
Magistrate having jurisdiction to try the same and the Magistrate to whom any such case

Page NO: 28
is forwarded shall proceed to hear the complaint against the accused as if the case had been
forwarded to him under Section 482 of the said Code1.
(4) Any proceeding before the Commission shall be deemed to be a judicial proceeding
within the meaning of Sections 193 and 228 of the Indian Penal Code, 1860(45 of 1860).
Gold:-
A gold price fully depends on US Dollar and Indian Rupee value. When Dollar
decrease Gold value will be decrease in India. Because Gold is imported in India from Us.
so Us rate is reflected to Gold price in India.
India rupee value increase the gold price will be decrease, Rupee value decrease gold price
will Increase.
Now a days gold price is come down because Foreign countries has a thinking to sell the
god for increase the Foreign currency and increase the them currency value.
In India Foreign investors are very high, US has to thinking to increase the interest rate so
India those have a foreign investors are going to invest in US so earn profit.
When the Foreign investors invest in Indian Gold Market, Gold price will be increase,
otherwise decrease.

Page NO: 30
5.Methodology:-
Secondary Data:-
Getting Started…..
At the start of our SIP, our very first objective was to understand the commodity markets
and its dos and don’ts. Having understood the intricacies of the working and the
functioning of the commodity market, we also understood how risk can be minimized by
taking a position at the exchange.
The Bullion Traders…….
In Bullion markets, more specifically on gold traders. Gold is the most actively traded
commodity over the exchange. More amount of liquidity is observed in the MCX exchange.
Hence, there would be a greater opportunity of trading and hedging for its investors.
Keeping in view this point, we focused more on gold rather than on silver.
Opportunity with clients……………….
Share Khan Pvt Ltd. had organized an educational campaign at the hi-tech city (Annexure
-), Hyderabad. The main objective of the campaign was to educate the HNI’s about various
investment opportunities available in the market. It was a two day program and we had an
great opportunity to interact with the clients and understand their perspective about the
market. As we had a pretty good exposure to the market movements and other technicalities
of trading at Share khan we were given the responsibility to explain the clients about the
company’s product.
Most of the clients there were either Business holders or working for big MNCs such as
Google, Microsoft, etc. Others were Business Holders, Students etc. We observed the
following from the interaction with these clients.
All the clients were well informed about the happenings in the market.
They had very huge portfolios which basically included mutual funds and diversified stocks.
Very few people invested in commodities which was basically lack of awareness about the
commodity markets.
People, who invested, invested only for the speculation purpose only and to book profit

Page NO: 31
ANALYSIS TECHNIQUE IN COMMODITY (MCX ):
1)FUNDAMENTAL ANALYSIS
2)TECHNICAL ANALYSIS
1)Fundamental Analysis:
a) How Supply & Demand Determine Price Stocks to Use
2)Technical Analysis:
a) Importance of Chart Analysis
b) Support & Resistance
c) Volume & Open Interest
d) Chart Patterns
e) Commodity Spreads
f) Technical Indicators
1.Fundamental analysis:
In a market economy, price is determined by the interaction of supply and demand. The study of
supply and demand is also known as the study of fundamentals or "fundamental analysis". In this
section you will learn how to estimate a market price for commodities using the law of supply
and demand as reflected in the "stocks to use ratio". The stocks to use ratio is a closely watched
figure in when establishing asking prices for commodities. In order to understand stocks to use,
you must understand the economic theory of supply and demand. Supply and demand graphs are
useful tools used to illustrate this concept.

Page NO: 32
How Supply and Demand Determine Commodities Market Prices:
Price is derived by the interaction of supply and demand. The
resultant market price is dependent upon both of these
fundamental components of a market. An exchange of goods or
services will occur whenever buyers and sellers can agree on a
price. When an exchange occurs, the agreed upon price is called
the "equilibrium price", or a "market clearing price" . This can be
graphically illustrated as follows: ( Figure 3)
In figure 3, both buyers and sellers are willing to exchange the
quantity "Q" at the price "P". At this point supply and demand are
in balance or "equilibrium". At any price below P, the quantity
demanded is greater than the quantity supplied. In this situation consumers would be anxious to
acquire product the producer is unwilling to supply resulting in a product shortage. In order to
ration the shortage consumers would have to pay a higher price in order to get the product they
want; while producers would demand a higher price in order to bring more product on to the
market. The end result is a rise in prices to the point P, where supply and demand are once again
in balance. Conversely, if prices were to rise above P, the market would be in surplus - too much
supply relative to the demand. Producers would have to lower their prices in order to clear the
market of excess supplies. Consumers would be induced by the lower prices to increase their
purchases. Prices will fall until supply and demand are again in equilibrium at point P.
A market price is not a fair price to all participants in the marketplace. It does not guarantee total
satisfaction on the part of both buyer and seller or all buyers and all sellers. This will depend on
their individual competitive positions within the market. Buyers will attempt to maximize their
individual well being within certain competitive constraints. Too low a price will result in excess
profits for the buyer attracting competition. Likewise sellers are also considered to be profit
maximizers. Too high a price will likewise attract additional producer competition within the
market. Therefore, there will exist different price levels where individual buyers and sellers are
satisfied and the sum total will create a market or equilibrium price
Demand and supply:
When either demand or supply changes, the equilibrium price will change. For example, good
weather normally increases the supply of grains and oilseeds, with more product being made
available over a range of prices. With no increase in the quantity of product demanded, there will
be movement along the demand curve to a new equilibrium price in order to clear the excess
supplies off the market. Consumers will buy more but only at a lower price. This can be
illustrated graphically as follows: (see Figure 4.)
Likewise a shift in demand due to changing consumer eferences will also influence the market
price. In recent years there has been a shift in demand on the part of overseas Canadian wheat
buyers toward the Canada Prairie Spring varieties, away from the Hard Red Spring varieties. A
decline in the preference for Hard Red Spring wheat shifts the demand curve inward, to the left,
as illustrated in figure 5.

Page NO: 33
With no reduction in supply, the effect on price results from a movement along the supply curve
to a lower equilibrium price where supply and demand is once again in balance. In order for
prices to increase producers will have to reduce the quantity of hard red spring wheat brought to
the market place or find new sources of demand to replace the consumers who withdrew from
the marketplace due to changing preferences or a shift in demand.
Changes in supply and demand can be short run or
long run in nature. Weather tends to influence market
prices generally in the short run. Changes in
consumer preferences can have either a short run or
long run effect on prices depending upon the goods
or services, for example whether they are luxuries or
necessities. A luxury good may enjoy a short term
shift in demand due to changing styles or snob appeal
while necessities tend to have stable or long run
demand curves. Another major factor influencing
market prices is technology. A major effect of
technology in agriculture is to shift out the supply
curve rapidly by reducing the costs of production on
a per unit basis. At the same time if total demand
does not increase sufficiently to absorb the excess
goods produced at lower costs, the long run impact of technology on the market place will be to
lower prices. The rapidly shifting supply curve coupled with a slower moving demand curve has
generally contributed to lower prices for agricultural output when compared to prices for
industrial products
2.Technical analysis:
Technical Analysis is the forecasting of future financial price movements based on an
examination of past price movements. Like weather forecasting, technical analysis does not
result in absolute predictions about the future. Instead, technical analysis can help investors
anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety
of charts that show price over time.

Page NO: 34
Types of chart:
1. Line Chart:
Line charts are the most basic form of charts, They are composed of a single line from left to
right that links the closing prices. Generally, only the closing price is graphed, presented by a
single point.
This is a popular type of chart used in presentations and reports to give a very general view of
the historical and current direction.
It is a clear as well as a simple way of getting a general idea of the price movement’s direction in
the market, which is preferred by some traders.
While this kind of chart doesn’t provide much insight into intraday price movements, many
traders consider the closing price to be more important than the open, high, or low price within a
given period.
2.Bar Chart:
One of the basic tools of technical analysis is the bar chart. Bar charts are also referred to as
open-high-low-close (OHLC) charts. They are comprised of a series of vertical lines that indicate
the price range during that Time Frame.
Bar charts enable traders to discover patterns more easily as they take into account all the prices,
open, high, low and close. The opening price is the horizontal dash on the left side of the
horizontal line and the closing price is located on the right side of the line. If the opening price is

Page NO: 35
lower than the closing price, the line is often colored black (or green) to represent a rising period.
The opposite is true for a falling period, which is represented by a red color.
3.Candlestick Chart:
Another kind of chart used in the technical analysis is the candlestick chart, so-called because the
main component of the chart which represents prices looks like a candlestick, with a thick ‘body’
and usually, a line extending above and below it, called the upper shadow and lower shadow,
respectively.
The top of the upper shadow represents the high price, while the bottom of the lower shadow
shows the low price. Patterns are formed both by the real body and the shadows. Candlestick
patterns are most useful over short periods of time, and mostly have significance at the top of an
uptrend or the bottom of a downtrend, when the patterns most often indicate a reversal of the
trend.
The wider part of the candlestick is shown between the opening and closing price. It is usually
colored in black/red when the security closes on a lower price and white/green the other way
around.
The thinner parts of the candlestick are commonly referred to as the upper/lower wicks or as
shadows. These show us the highest and/or lowest prices during that timeframe, compared to the
closing as well as opening price.
The relationship between the bodies of candlesticks is important to candlestick patterns.
Candlestick charts make it easy to spot gaps between bodies.
A slight drawback of candlestick chart is that candlesticks take up more space than OHLC bars.
In most charting platforms, the most you can display with a candlestick chart is less than what
you can with a bar chart.

Page NO: 36
4.Heikin Ashi:
Heikin Ashi is a kind of trading chart that originated in Japan. Heikin Ashi charts are similar to
candlestick charts in that the color of the candlestick denotes the direction the price is moving
.Heiken Ashi charts are able to show the uptrend and downtrend more clearly. A strong uptrend
exists when there are continuous green HA candles without the lower shadow. A strong
downtrend exists when there are continuous red HA candles without the upper shadow.
The main difference between candlestick and Heikin Ashi charts is that the HA charts average
price moves, creating a better appearance. Because the HA price bars are averaged, they don’t
show the exact open and close prices for a particular time period.Heikin Ashi charts can be used
independently though, especially by swing traders or investors. Day traders tend to use Heikin
Ashi charts more as an indicator.
Point and Figure Charts
Point-and-figure is not very well known or used by the average investor, but they have a long
history of use dating back to the first technical traders. These simple charts only focus on the
significant price moves, while filtering out ‘noise’.
Point & Figure charts consist of columns of X’s and O’s that represent filtered price movements.
X-Columns represent rising prices and O-Columns represent falling prices. Each price box
represents a specific value that price must reach to warrant an X or an O. Time is not a factor in
P&F charting. No movement in price means no change in the P&F chart.

Page NO: 37
There are many varied ways to mark P&F charts from using just the close or the highs and lows.
The box size can be set to be a fixed value or a set %. The construction of point-and-figure charts
simplifies the drawing of trend lines, and support and resistance levels, which is why point-and-
figure charts are ideal for detecting trends, and determining support and resistance levels.
Chart analysis:
Technical analysis can be as complex or as simple as you want it. The example below represents
a simplified version. Since we are interested in buying stocks, the focus will be on spotting
bullish situations.

Page NO: 38
Overall Trend: The first step is to identify the overall trend. This can be accomplished with
trend lines, moving averages or peak/trough analysis. For example, the trend is up as long as
price remains above its upward sloping trend line or a certain moving average. Similarly, the
trend is up as long as higher troughs form on each pullback and higher highs form on each
advance.
Support: Areas of congestion and previous lows below the current price mark the support levels.
A break below support would be considered bearish and detrimental to the overall trend.
Resistance: Areas of congestion and previous highs above the current price mark the resistance
levels. A break above resistance would be considered bullish and positive for the overall trend.
Momentum: Momentum is usually measured with an oscillator such as MACD. If MACD is
above its 9-day EMA (exponential moving average) or positive, then momentum will be
considered bullish, or at least improving.
Buying/Selling Pressure: For stocks and indices with volume figures available, an indicator that
uses volume is used to measure buying or selling pressure. When Chaikin Money Flow is above
zero, buying pressure is dominant. Selling pressure is dominant when it is below zero.
Relative Strength: The price relative is a line formed by dividing the security by a benchmark.
For stocks, it is usually the price of the stock divided by the S&P 500. The plot of this line over a
period of time will tell us if the stock is outperforming (rising) or underperforming (falling) the
major index.
The final step is to synthesize the above analysis to ascertain the following:
▪ Strength of the current trend.
▪ Maturity or stage of the current trend.
▪
▪ Reward-to-risk ratio of a new position.
▪ Potential entry levels for a new long position.

Page NO: 40
1)To study and understand the price movements and make profit in gold :
Candlestick chart pattern:
Candlestick chart pattern using we can analysis predicting about the price
movement in gold.
It show the current trend and when &where enter into the contract,
For example :your enter into the gold contract take 1 short position on price 18500 and taking
short covering on 18400 you are profit is 100 point .
commodity Lots
size
transaction Sold
price
Bought
price
Brokerage Gross
profit
Net
profit
Gold 100 Short(buy
and sell)
18500 18400 1107 10000 8893
Gold M 10 Short( buy
and sell)
18300 18200 111 1000 889
GOLDGUINA 1 Short (buy
and sell)
18250 18350 11 100 89
short
Short
covering

Page NO: 41
Brokerage calculation:
Profit Calculation - Example: Gold from following table:
Commodity = GOLD; Lot Size = 100; Bought Price = 18400;
Sold Price = 18500.
Brokerage (Commission)
= (Bought Price * Lot Size 0
.0003) + (Sold Price * Lot Size * .0003)
= (18400 * 100 .0003) + (18500 * 100 .0003)
= (552) + (555)
= 1,107
Gross Profit = (Sold Price - Bought Price) * Lot Size = (18500 - 18400) * 100
= (100) * 100
= 10,000
Net Profit = (Gross Profit - Brokerage) = (10000 - 1107)
= 8,893

Page NO: 42
2) to study and understand how can hedging helpful in risk management
In gold contract:
OPTION CHAIN ANALYSIS GOLD 1 JAN 2019 TO 31 JAN 2019:
Instrument
Type
Date price Quantity (000's) GRAM
Contract volumes
(Lacs)
OPTFUT 01-Jan-19 1289 59.00 11874.25
OPTFUT 02-Jan-19 1273 373.00 11833.40
OPTFUT 03-Jan-19 1286 586.00 16601.16
OPTFUT 04-Jan-19 1227 627.00 15882.01
OPTFUT 07-Jan-19 1628 618.00 14640.91
OPTFUT 08-Jan-19 1254 354.00 11224.73
OPTFUT 09-Jan-19 1223 873.00 28065.46
OPTFUT 10-Jan-19 1221 874.00 28021.99
OPTFUT 11-Jan-19 1233 333.00 10606.21
OPTFUT 14-Jan-19 1217 717.00 12947.67
OPTFUT 15-Jan-19 1253 653.00 18876.08
OPTFUT 16-Jan-19 1337 337.00 10812.67
OPTFUT 17-Jan-19 1248 848.00 16298.79
OPTFUT 18-Jan-19 1284 549.00 17183.38
OPTFUT 21-Jan-19 1281 481.00 15376.10
OPTFUT 22-Jan-19 1286 541.00 17186.09
OPTFUT 23-Jan-19 1213 413.00 13213.26
OPTFUT 24-Jan-19 1256 656.00 18403.53
OPTFUT 25-Jan-19 1270 1070.00 12336.02
OPTFUT 28-Jan-19 1246 1046.00 13881.03
OPTFUT 29-Jan-19 1229 1229.00 10091.50
OPTFUT 30-Jan-19 1259 359.00 11847.46
OPTFUT 31-Jan-19 1219 419.00 13812.62
Hedging is a risk management strategy, it is used in protecting loss from fluctuation in the price
of commodity gold.
For Example no 1: you are enter into the hedging strategy then ,
➢ Sell one in the money call option at strike price 1223
➢ Sell one in the money put option at strike price 1221
Example no.2:

Page NO: 43
Example no.2:
How it work :
➢ It depending on contract volumes your select the more volume traded in that contract this
is successfully work and it helping in risk managing in gold contract.
➢ After one side position is goes in loss and other side position come in profit then your
exist that position is in loss exist it and booking profit

Page NO: 44
3) to study analyzed the technical indicator and providing protection our
investment :
Technical indicator play an important role in protecting our investment.
MACD technical indicator show the enter into the investment and where exist into the
investment.
Two point in the MACD band 1ST
point is bath point and 2nd
is death point, bath point give entry
point into the investment and death point give exist point into the investment as shown in the
following chart.
INVESTMENT DATE EXIST INVESTMENT
DATE
PRICE ENTRY AND EXIST
23 DEC 2018 23 JAN 2019 31750-28500
This indicator protecting from loss 3250 that point your not taking any exist entry then our max
loss is 4500 hence this indicator is used for protection purpose of our investment.

Page NO: 45
4)to study and analyzed fundamental data how can help you predicting future
value:
Gold’s diverse uses, in jewellery, technology and by central banks and investors, mean different
sectors of the gold market rise to prominence at different points in the global economic cycle.
This diversity of demand and self-balancing nature of the gold market underpin gold’s robust
qualities as an investment asset.
This is a comprehensive time series of gold demand – broken down by sector and country – and
gold supply – broken down by mine production, recycling and producer.

Page NO: 46
DATE PRICE
28-Dec-18 32700
29-Dec-18 32780
30-Dec-18 32860
31-Dec-18 32940
01-Jan-19 33020
02-Jan-19 33100
03-Jan-19 33180
04-Jan-19 33260
05-Jan-19 33340
06-Jan-19 33420
07-Jan-19 33500
08-Jan-19 33580
09-Jan-19 33660
10-Jan-19 33740
11-Jan-19 33820
12-Jan-19 33900
13-Jan-19 33980
14-Jan-19 34060
15-Jan-19 34140
16-Jan-19 31780
17-Jan-19 31700
18-Jan-19 31980
19-Jan-19 31860
When either demand or supply changes, the equilibrium price will change. With no increase in the
quantity of product demanded, there will be movement along the demand curve to a new equilibrium
price in order to clear the excess supplies off the market. Consumers will buy more but only at a lower
price. This can be illustrated graphically as follows:
30000
30500
31000
31500
32000
32500
33000
33500
34000
34500
DEMAND AND SUPPLY CHART

Page NO: 47
8.Conclusion
India is an agrarian country producing a large variety of crops. It also stands as one of the
leaders in the production of wheat, spices and other such crops. For such a country like
ours, commodity futures trading can prove to be an excellent opportunity to the famers and
other such traders for efficient price discovery. Commodity trading can also be used as a
hedging tool for minimizing risk against future price fluctuations.
In order to attain the actual objective of commodity trading, there should be adequate
awareness among these farmers, traders, manufacturers, importers and exporters. But
according to the primary research, we have concluded that the awareness level about the
commodity market is very less and there is a long way to go to reach the actual beneficiaries
of these markets. One can say this because the awareness level among the qualified and
educated people is itself low so it will take a long period of time to reach these farmers.
The main reason for this lack of awareness is due to the nascent markets and the
mechanism of their operations. Almost all the commonly traded commodities are present
over the exchanges; most of the market participants prefer forward contracts over the
exchange traded futures contracts. The participants who prevail in the market have issues
regarding the delivery mechanism and the specification standards of the
contract. Also, as only very few large players exist in the markets, monopoly is being
created by them and thus efficient price discovery is unable to take place.
People prefer the security in the investments in the assets as compared to the high returns
on those particular assets. As an asset class, commodity markets are said to have high risk
with high returns. So, not many people who have knowledge about commodity trading
participate in the markets.
Primary research also reveals the fact that the amount of speculator as more as compared
to the number of hedgers in the commodity markets. Due to this fact, although the volumes
are high, the actual amount of delivery is very meager.

Page NO: 48
9. Bibliography
❖ Bessler, David A. and Covey, Ted (August 1991) Cointegration: some results on
U.S. cattle prices, The Journal of Futures Markets 11(4) 461–74
❖ Choudhry, T. (1997), Short-run Deviations and Volatility in Spot and Futures
Stock Returns: Evidence from Australia, Hong-Kong and Japan, The Journal of
Futures Markets 17 (6), 689-705.
❖ Cox, Charles C. (December 1976) Futures trading and market information, Journal
of Political Economy 84(6) 1215–37
❖ Dickey, David A. and Fuller, Wayne A. (July 1981) Likelihood ratio statistics
for autoregressive time series with a unit root, Econometrica 49(4) 1057–72 .
❖ www.mcxindia.com
❖ www.ncdex.com
❖ www.nseindia.com
❖ www.sharekhan.com
❖ www.nationalspotexchange.com
❖ www.sripadonline.com
❖ www.fmc.gov.in
❖ http://www.goldpriceindia.com/gold-price-history.php
❖ http://in.investing.com/currencies/usd-inr-historical-data.

commodity trading analysis technique in GOLD

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