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Investing in Gold-A study

Puneet Arora-75141

Shantanu Vashishth-75150

Teacher-Ms. Vibhuti Vashishth

BFIA 2B


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Contents

Investment Channels

Factors affecting Gold prices in India

Evaluating performance of Gold


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Investment Channels

Gold coins & bars

Accounts

Exchange Traded Products

Certificates

Derivatives,CFDs and spread bettings

Mining Companies

Contents


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Gold bars & coins most traditional way of investing in gold is by buying bullion

gold bars

these can easily be bought or sold at the major banks or

from bullion dealers

gold bars carry lower premium over spot price than gold

coins.

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.


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AccountsGold bullion banks offer two types of gold accounts -

allocated and unallocated:

1. Allocated account

2. Unallocated account

Other opportunities for smaller investors include:

1. Gold pool accounts

2. Electronic currencies


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Exchange Traded Products

include ETFs, ETNs, and CEFs which are traded like shares

on the major stock exchanges.

Gold ETPs represent an easy way to gain exposure to the

gold 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 the

amount of gold in each certificate will gradually decline over

time.


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CertificatesGold certificates allow gold investors to avoid the risks and

costs associated with the transfer and storage of physicalbullion (such as theft, large bid-offer spread, and metallurgical

assay costs)

It entails taking on a different set of risks and costs associated

with the certificate itself (such as commissions, storage fees,and various types of credit risk).


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Mining Company


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ac ors a ec ng go pr ces nIndia

International prices.

Interest rates.

Dollar-Rupee Dynamics

Central Banks Reserves

Demand for the metal

Gold Production

The changes in the CME restrictions.


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Central Bank Reserves

Back


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Back


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Demand for the metal

Back


14/26Data source: Gems and Jewellery Export Promotion Council


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Gold Production

Back


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va ua ng per ormance oGold

3-year weekly return correlation on key commodities and

gold

1-year annualised daily return volatility on key commodities

and gold

22-day rolling annualised daily return volatility on gold andS&P GS

Performance of gold v/s other metals

Performance of gold v/s other commodities

Gold and S&P(% year charts)

Gold & Trade-weighted US dollar

Gold v/s Sensex


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0.47

0.53

0.45

0.15

-0.010.21

0.35

0.45

0.47

0.66

0.48

0.73

-0.2 0.0 0.2 0.4 0.6 0.8 1.0

R/J CRB Commodity Index

DJ UBS Commodity Index

S&P GS Commodity Index

DJ UBS Softs Index

DJ UBS Livestock IndexDJ UBS Grains Index

DJ UBS Energy Index

Brent crude oil (US$/bbl)

DJ UBS Industrial Index

Platinum (US$/oz)

Palladium (US$/oz)

Silver (US$/oz)

Correlation

Notes: Data ending 28 September 2012

Source: Bloomberg, LBMA, LME, World Gold Council

Chart: 3-year weekly return correlation on key commodities and gold


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0

510

15

20

25

30

35

40

DJUBSLives

tockIndex

Gol

d(US$/oz)

R/JCRBCommodityIndex

DJUBSCommodityIndex

S&PGSCommodityIndex

Platinum(

US$/oz)

DJUBSS

oftsIndex

CopperLME(US$/t)

AluminumL

ME(US$/t)

ZincLME(US$/t)

NickelLME(US$/t)

Brentcrudeoi

l(US$/bbl)

Palladium(

US$/oz)

LeadLME(US$/t)

DJUBSEn

ergyIndex

Silve

r(US$/oz)

DJUBSGr

ainsIndex

TinLME(US$/t)

%

Notes: Data ending 28 September 2012Source: Bloomberg, LBMA, LME, World Gold Council

Chart: 1-year annualised daily return volatility on key commodities and gold (US$)


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0

10

20

30

40

50

60

70

80

10/2002 04/2004 10/2005 04/2007 10/2008 04/2010 10/2011

%

Gold (US$/oz) S&P GS Commodity Index

Notes: Data ending 30 September 2012

Source: Bloomberg, World Gold Council

Chart: 22-day rolling anualized daily return volatility on gold and S&P GS

P f f G ld V/ Oth t l


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Gold

(US$/oz)

Silver

(US$/oz)

Palladium

(US$/oz)

Platinum

(US$/oz)

Aluminum

LME (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

P f f G ld & th


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Column1 Gold (US$/oz)

Brent crude oil(US$/bbl)

DJ UBSEnergy Index

DJ UBS GrainsIndex

DJ UBSLivestock

IndexDJ UBS Softs

Index

S&P GSCommodity

Index

DJ UBSCommodity

Index

R/J CRBCommodity

Index

1-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 & other

commodities

$


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0

100

200

300

400

500

600

700

10/2002 10/2004 10/2006 10/2008 10/2010

Index level

Gold (US$/oz) S&P 500

Notes: Data endin g 30 September 2012Source: Bloomberg, World Gold Council

Chart 5: Gold and S&P 500 in US$ (2 Sep 2002=100)

$


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0

100

200

300

400

500

600

700

10/2002 10/2004 10/2006 10/2008 10/2010

Index level

Gold (US$/oz) Trade-weighted US$

Notes: Data ending 30 September 2012Source: Bloomberg, World Gold Council

Chart 6: Gold (US$/oz) and the trade-weighted US dollar


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0

10

20

30

40

50

60

70

80

90

100

10/2002 04/2004 10/2005 04/2007 10/2008 04/2010 10/2011

%

Gold (US$/oz) S&P 500

Chart 4: 22-day rolling anualized daily return volatility on gold and S&P 500 (US$)

Notes: Data ending 30 September 2012Source: Bloomberg, World Gold Coun cil

Gold /s Sense


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Gold v/s Sensex


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