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GOLD INDUSTRY

Submitted by:

Yash Mandalia (133)

Sumit Salet (147)

Mohit Gupta (117)

Aditya Jain (118)

Rahul Panagaria (138)

Urmil Shah(154)

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The key to successdriving desirability

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INTRODUCTION

y Unique asset

y Monetary asset and partly a commodity

y Internationally recognized asset

y Not dependent upon any governments promise to pay

y South Africa is the world's largest gold producer with 394 tons in

2001, followed by US and Australia.

y India is the world's largest gold consumer with an annual demand

of 800 tons

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Conversion rate

y 1 kg = 35.274 ounces

y Conversion of 995 gold rate from rate in dollar/ounce to

rs/10 gms

y Gold rate in dollar/ounce * 0.3199 * dollar rupee

conversion + 206(import duty of gold)

y Eg If gold rate is 900$/ounce = (900 * 0.3199 *48.90) +

206 = 14284 rs/ 10 gms

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The Gold Standard

In 1900, Congress passed the GoldStandard Act which fixed the price ofgold at $20.67 per ounce.

Gold standard

a monetarystandard under which the basiccurrency unit is equal to, and can beexchanged for, a specific amount ofgold.

People still used the same types of

currency (greenbacks, silvercertificates, etc) as they did before,but now they could exchange themfor gold at the Treasury.

http://www.stanleymeltzoff.com/History7.html

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Advantages of the Gold Standard

y People feel secure about their fiat money if they know theycan trade it in for gold.

y It is supposed to prevent the government from printing toomuch paper money.

y In reality, since the chances of everyone trading in their fiatmoney for gold on the same day is slim, governments just

maintain the appearance of it.

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Disadvantages of the Gold Standard

y 1.) If the amount of gold in the treasury does not growas fast as the economy, the money supply can not expand

and economic growth will be restricted.y 2.) If everybody trades their money in for gold, the

nations gold reserve will disappear.

y 3.) Since the price of gold changes dramatically over

time, any government that tries to fix the price of goldhas huge market pressures working against it.

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Gold economy

y gold/jewellery industry is fast-growing, with impressive

domestic and export sales

ycurrent size of the gold economy is around US$ 6 billion andemploys over half a million people

y a large number of skilled goldsmiths/gold merchants from

India are engaged in gold trade and industry in almost all theoil-rich Middle Eastern count

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Demand for & Supply of Gold

To explain the ever-increasing demand for gold in India, various

hypotheses have been put forward from time to time:

y (i) Demand for gold has an autonomous character. Supply follows

demand.

y (ii) Demand exhibits income elasticity, particularly in the rural and

semi-urban areas.

y (iii) Price differential creates import demand, particularly illegal

import prior to the commencement of liberalization in 1990.

y (iv) A part of the demand is caused by the need to stash away

unaccounted wealth/income.

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Market Influencing Factors

y Above ground supply from sales by central banks, reclaimed

scrap and official gold loans

y Producer / miner hedging interest

yWorld macro-economic factors - US Dollar, Interest rate

y Comparative returns on stock markets

y Domestic demand based on monsoon and agricultural output

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Gold market in india

y The gold market in India is predominantly a market for

buying and selling physical gold.

y In the wholesale segment, nominated agencies are the bulk

importers.y In April 2000, the government introduced voluntary

hallmarking of gold jewellery through the Bureau of Indian

Standards.

y

Gold lending/leasing volumes are small in comparison tophysical buying and selling.

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Major Indian markets

y Since October 2003 the government has allowed futures

trading :

Multi Commodity Exchange of India Ltd (MCX)

National Commodity and Derivatives Exchange Ltd (NCDEX)

Exchange Traded Funds (ETFs)

y Recently, MCX-SX , BSE & NSE have introduced currency

exchange trading in order to hedge currency for benefit of

Importer/Exporter

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Indian Gold Demand in tones and rupee gold price

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Future trends

y gold demand is income-elastic, it would be safe to assume

that demand will increase over the next decade.

y the major component of demand can be estimate on the basisof the number of marriages that take place annually.

y Change in mind set of rural people due to spread of banking

sector.

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Conclusion

y With the globalization and a rapidly evolving environment,

consumers are exposed to competition.

y Due to that fact, jewellery market became a buyer market andnot a seller market.

y Have more strategically thinking focusing on long term success.

y In these volatile and challenging times, it is time to put more

effort into marketing, branding and overall customer

experience instead of shying away.