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Summer Internship Project

Topic: A Study on Gold ETFs

Presented to: Presented by:

Dr.Jyotsna Haran Piyush Rathi

(Associate Professor) PGP-1

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History

A Gold ETF is a unique type of exchange-traded fund that tracks the priceof gold. Gold exchange-traded funds are traded on the major stockexchanges including New York, London, Zurich, Paris and Mumbai.

The first gold exchange-traded fund was start in March 2003 on theAustralian Stock Exchange under Gold Bullion Securities (ticker symbol

"GOLD"). Gold Bullion Securities (GBS) are fully backed by gold which isboth deposited and insured.

The chairman of ETF Securities Ltd, Graham Tuckwell, developed theworlds first Gold ETF in Australia and London in 2003. ETF Securities Ltdalso launched the world's first Oil exchange traded commodity in 2005followed by an entire platform of exchange traded commodities whichwere listed on the London Stock Exchange in 2006. He is also a registeredrepresentative of ALPS Distributors Inc.

GRAHAMTUCKWELL

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Introduction

Exchange Traded Fund (ETFs) are mutual fund units which investorsbuy/sell from the stock exchange, as against a normal mutual fundunit, where the investor buys/sells through a distributor or directlyfrom the AMC.

Gold ETFs provided investors a mean of participating in the goldbullion market without the necessity of taking physical delivery ofgold & to buy or sell that participation through the trading of unitson stock exchange.

Gold ETFs are mutual fund schemes that invest in standard goldbullion (99.5% purity). They are special types of exchange tradedfunds (ETFs) which tracks the prices of gold (i.e. whose value isbased on price of gold) and are convenient and inexpensivealternative to owning physical gold.

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Gold ETFs in India

It is a very recent development that the market regulator SEBI

allowed Gold Exchange Traded Funds (ETFs) in India. The thought of

Gold ETF was first officially conceptualized by Benchmark Asset

Management Company in India, where they filed a proposal with

the SEBI in May 2002. However, it has not received regulatoryapproval and was launched later in 2007. Benchmark Mutual Fund

launched India's first Gold ETF on 15 February followed by UTI

Mutual Fund's Gold scheme on 1 March 2007.

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Turnover of each class of ETF

April 2011

Gold 32689.17 43.65%

Money Market 26329.83 35.16%

Equity Market 15844.24 21.16%

International Equity Market 18.29 .02%

Total 74881.53 100%

Source: www.nseindia.com & www.amfindia.com

Through table it clearly shown that the highest turnover is in Gold.

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What are ETFs?

Exchange traded funds are mutual funds which you can buy and sell

in the stock market, just like any other stocks or shares. This as far

as investment is concerned an exchange traded fund is just a

mutual fund and as far as buying or selling the mutual fund is

concerned, an exchange traded fund is just like a stock or equitywhich you can trade on stock exchange like NSE.

Source: http://niftyprediction.blogspot.com/2008/09/etfs-in-india-all-those-bees-on-nse.html

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What is Gold ETFs? Gold ETFs enable investors to purchase and sell shares of a mutual

fund whose primary asset is gold. These funds are listed on thestock exchanges, i.e., can be bought or sold like other stocks orshares. But one needs to have a de-mat account and a share tradingaccount to invest in gold ETFs. The unit size in a gold ETF is as smallas one gram of gold equivalents.

Source: http://www.mutualfundetf.info/etf-investments/what-is-gold-etf-can-anybody-teach-how-to-invest-in-gold-etf/

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Features of Gold ETF

Exchange Traded Fund are open ended mutual funds that are

passively managed and most of them seek to mirror the return of

an index, a commodity of assets. ETFs are listed and traded on stock

exchanges like stocks.

Gold ETFs provided investors a means of participating in the gold

bullion market without the necessity of taking physical delivery of

gold, and to buy and sell that participation through the trading of a

security of stock exchange. Gold ETF would be a passive

investment; so, when gold prices move up, the ETF appreciates and

when gold prices move down, the ETF losses value.

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List of Gold ETFs in India with symbol

HDFC Gold Exchange Traded Fund (HDFCMFGETF) ICICI Prudential Gold Exchange Traded Fund (IPGETF) KOTAK GOLD ETF (KOTAK)

Quantum Gold Fund (QGOLDHALF) Reliance Gold Exchange Traded Fund (RELGOLD) Religare Gold Exchange Traded Fund (RELIGAREGO) SBI GOLD EXCHANGE TRADED SCHEME (SBIGTS) UTI GOLD Exchange Traded Fund (GOLDSHARE) Gold Benchmark Exchange Traded Scheme (Gold BEES) Axis Gold ETF (AXISGOLD)

Source: http://www.goldetf-funds.com/gold-etfs-list-%E2%80%93-gold-etf-funds-list-in-india

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Average Daily turnover (in laces)

0

200

400

600

800

1000

1200

Series1

Among 10 Gold ETFs the top 3 gold ETF contributed 83.62%of the

total trading volumes during the April 2011.The total trading volume for this month was Rs.32689.19 laces &

the top 3 securities were GOLDBEES, KOTAKGOLD & GOLDSHARE.

Source: www.nseindia.com

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Advantages of Gold ETFs

Lower cost

Buying & selling flexibility

Continuous, Intraday pricing

Access to indicators & Indexes

Diversity in investment opportunities

Transparency

Convenience

Resale value

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Key benefits of Gold ETF

SIMPLE

We can buy just 1 unit ,it is easy to buy

Buy it unit by unit as we want & built wealth

SAFE

You can assured of quality

De-mat holding allows security

TRUST

Accepted as colaterals for loan

You can trust on purity

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Objective

To find out the awareness of the Gold ETF

among investors & to ascertain the investment

behavior towards Gold ETF.

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Research Methodology

Research Design:- Descriptive Research

Research Approach:- Qualitative & Quantitative

Sample Design:- Simple Random Sampling

Sample Size:- 96

Data Collectiona.) Primary Data:- The primary data was collected from the samplethrough sample survey with the help ofquestionnaires & personalinterview with people.

b.)Secondary Data:- The secondary data is taken from

websites, magazines & CD. Confidence Level:- 95%

Confidence Interval:- 5%

Period of Study:- 1 May 2011-30 Jun 2011

Data Analysis

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Findings 96 respondents only 5 persons not having de-mat a/c.

There investment decision mostly on expert comment (42%) &advisor/broker (28%).

Respondents track the market mostly through newspaper (36%) &internet (32%).

60% of people invest 10 to 30% saving in stock market.

46% of people investing there money, they prefer companyreputation.

54 people out of 96 not aware about Gold ETF.

23% of people invested in Gold ETF.

69% of people want to invest in Gold ETF by direct investment.

38% of people mentality while investing in Gold ETF is for futureuncertainty.

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Cont.

64% of people know Gold ETF by internet & newspaper.

27% of people have good knowledge about Gold ETF.

35% of people attract from the feature future planning in investing

in Gold ETF.

Majority of the investors have lack awareness & knowledge about

investment opportunities in Gold ETF schemes offered by various

AMCs.

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Recommendations

AMCs should take steps to increase customer awareness regarding

Gold ETF scheme investment options & the benefits of investing in

them.

Broking firms should also take steps to increase customer

awareness with investor education & other awareness campaigns

through advertising in newspaper, internet& other advertisement

instruments.

Investors investing in gold should diversify portfolio in Gold ETF

instead of investing in physical gold.

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Limitations

The sample size is small as compared to the number of investors

present in India does not include investor of other geographical

areas.

Majority of the investors who invest in gold prefer physical gold

instead of Gold ETF.

Majority of investors & trader are not aware about the concept of

Gold ETF.

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Conclusion Gold ETFs offer investor a convenient way, investing in gold as a

security without the hassles of storage & safety.

It also provides various other benefits such as E-trading & De-matstorage facility.

India is the world's biggest consumer of gold, consuming 700-800

tones annually, the majority of which is used for jewellery. GoldETFs are expected to be popular as investment-led buying for goldhas pushed aside some of the demand for gold jewellery. Buying

jewellery as an investment in gold can be expensive as charges inthe form of making, storage and other services tend to increase the

cost, while Gold-ETFs can be an effective invest tool to help onebuild significant wealth over time.

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Bibliography

www.nseindia.com

www.nsegold .com

http://www.etfsecurities.com/us/news/etfs_news_100318.asp

http://www.etfgold.net/gold-etf-india/

http://www.goldetf-funds.com/gold-etfs-list-%E2%80%93-gold-etf-funds- list- in-india

http://goldetfblog.com/category/types-of-gold-etfs/

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