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International Commodity Management

GOLD

Presented By:Apurva Bharadwaj

Charlotte Herzog

Nishant Gupta

Prateek Jaiswal

Pratichi Dixit

Prerna Karwa

Rashmi Sharma

Sanchit Gupta

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India: Gems and Jewelry Market

The Indian G&J industry is highly fragmented with a large number of

domestic private sector companies (Majority unorganized sector)

Large market for Gems & Jewelry with domestic sales of over $10 billion.

India comprises of 4% of the global Gems and Jewelry market

The sector registered a growth of 7.42% in Apr09-Jan10

Third largest consumer of polished diamonds after USA and Japan

In USD (bn) Apr 2008-Jan

2009

Apr 2009-Jan

2010

Total Exports 20.98 22.54

Total Imports 56.43 81.08

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Top export markets for the Indian Gems

and Jewelry

28%

21%

15%

9%

8%

Exports by Value United States

Hong Kong

UAE

Singapore

Belgium

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Worlds Top 10 Exporters of Gold

592219

602290

615817

682665

1202740

2014520

20212103816460

3966040

4820140

0 1000000 2000000 3000000 4000000 5000000 6000000

Colombia

Singapore

Ghana

Germany

Japan

Canada

PeruAustralia

Hong Kong

United States

Amount (INR), 2009

T

otal World Exports: 27,143,718

17.8%

14.6%

14.1%7.4%

7.4%

4.4%

2.5%

2.3%

2.2%

2.2%

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Worlds Top 10 Importers of Gold

686101

699198705728

840495

1387780

1899900

25984302933720

3232440

6438690

0 2000000 4000000 6000000

Japan

CanadaThailand

Malaysia

Hong Kong

Australia

TurkeyUnited States

Italy

India

Amount (INR),2009

24.3%

12.2%

11.1%9.8%

7.2%

5.2%

3.2%

2.7%2.6%

2.6%

T

otal World Imports: 26,465,684

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Gold and India

India is the largest consumer of gold with an annual demand of around

800 tones.

World's largest trading centre

Gold imports stood at 739 tones during April 2009-March 2010.

According to MCX, the total stock of gold in the country is about 13,000

tones, which is about 9 percent of the world stock.

Nearly 95 % of gold is used to manufacture gold jewelry for the

domestic markets and the remaining 5% is exported.

Domestic consumption is dictated by monsoon, harvest and marriage

season.

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World Production

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World production hits 2572mt, but South Africa produces

only 204.92mt which is 7.7% of total world production.

The decline of gold production in South Africa in 2009, can

be attributed in part to problems of electricity production

but its mainly because of depletion of its best deposits

In the world official gold holdings ratings, India stood at

11th position with 557.7 tones of gold reserve as of June

2010, as per the World Gold Council.

India is the largest consumer of gold jewelry in the

world, accounting for about 20 per cent of global gold

consumption.

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The 10 biggest Gold owners in the world

(2009)

Rank: 10

Owner: Netherlands

Tones: 612.5

Share of ForeignReserves: 61.4%

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Rank: 9

Owner: Japan

Tones: 765.2

Share of Foreign Reserves: 2.1%

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Rank: 8

Owner: Switzerland

Tones: 1040.1Share of Foreign Reserves: 37.1%

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Rank: 7

Owner: China

Tones: 1054

Share of Foreign Reserves: 1.8%

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Rank: 6

Owner: SPDR Gold Shares ETF

Tones: 1120.6

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Rank: 5

Owner: FranceTones: 2450.7

Share of Foreign Reserves: 72.6%

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Rank: 4Owner: ItalyTones: 2451.8Share of Foreign Reserves:

66.5%

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Rank: 3

Owner: International

Monetary Fund

Tones: 3217.3

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Rank: 2

Owner: Germany

Tones: 3412.6Share of Foreign Reserves: 69.5%

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Rank: 1

Owner: USA

Tones: 8133.5Share of Foreign

Reserves: 78.3%

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Where to

find

GOLD

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Extraction of Gold

Gold can occur as sizeable nuggets, as fine grains orflakes in alluvial deposits

Gravity concentration has been historically the mostimportant way of extracting the native metal

If the gold can not be concentrated for

smelting, then it is leached by an aqueous solution Refractory gold ore is naturally resistant to recovery

by standard cyanidation and carbon adsorptionprocesses

Gold Smelting Mercury & Iron removal

Gold can be extracted from electronics scrap, scrapjewellery, and dental scrap.

Gold Parting is primarily the removing of silver fromgold and therefore increasing the purity of gold

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Extraction of Gold

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Features of Gold

A very ductile and malleable, brilliant yellow precious metal thatis resistant to air and water corrosion.

It is a precious metal that is very soft when pure (24 Kt.)

Gold is the most malleable (hammer able) and ductile (able to be

made into wire) metal. Gold is alloyed (mixed with other metals, usually silver and

copper) to make it less expensive and harder.

The purity of gold jewelry is measured in karats. Some countrieshallmark gold with a three-digit number that indicates the parts

per thousand of gold. In this system, "750" means 750/1000 gold(equal to 18K); "500" means 500/1000 gold (equal to 12K)

Alloyed gold comes in many colors.

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Classifications of Gold-bearing materials

Placers

Free milling ores

Oxidized ores

Silver-rich ores Iron sulphides

Arsenic sulphides

Copper sulphides

Antimony sulphide Tellurides

Carbonaceous

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Above ground stock 163000

Global Demandaveraged 3530tonnes (2005-2008)

India, China, USA, Turkey, SaudiArabia, UAE accountfor 60%

D

emand grew 43% Jewelry account for

almost 2/3 of annualgold demand.

Global Demand & Supply

51%

18%

17%12% 2%

Demand of Gold Jewellery

Official

Reserve

Investment

Industrial

Purpose

Unaccounted

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Total Global mineproduction is 2455tonnes

South Africa Majorproducer since 1880s

Antarctica mining isforbidden

China overtook SA in2007

Other Majorproducers USA, Australia, Russia and Peru

Global Demand & Supply

60%%

1 %

Supply Flows Mineproduction

Recycled gold

Net Central

bank sales

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Influences on Demand and supply

Demandside

Supply side

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Influences on Demand and supply

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Influences on Demand and supply

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How to trade Gold

Decide whether

long or short

Determine a trade

size

Review theSpread

Make the

trade again

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Government Policy

Highlights of New Foreign Trade Policy (2009-2014)

Duty Drawback

InO

verseas exhibition, value of Personal carriageincreased from US$ 2 mn to US$ 5 mn.

Reimport of unsold items 90 days

Objective to meet Dollar credit needs.

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MAJORWORLD TRADING CENTERSLondon

It really is the world oldest gold trading market, gold trading history hasnearly three hundred years.(London gold trade centre)

New York

Since December 31, 1974 the United States began allowing free trade gold

and private ownership of gold, the New York Commodity Exchange(COMEX) immediately became the world largest gold futures market

Tokyo

Since 1973, Japans gold market was born. Japan almost did not produce

gold, its gold depend on imported (Nikkie Tocom)

Singapore

It was real gold market established in 1969. Since 1973, Singapore hadgradually developed into an important gold trading cente (Singapore trade

development board)

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Major Trading Centers in IndiaMulti Commodity Exchange (MCX)- Mumbai

The National Commodity and Derivatives Exchange (NCDEX) - Mumbai

The National Multi-Commodity Exchange (NMCE) - Ahemdabad

The National Board of Trade (NBoT) Hyderabad

NCDEX MCX NMCE

Lot Size 100gm 1Kg 100gm

Tick Size 5 paise per 10gm Re 1 per 10gm Re 1 per 10gm

Quotation 10gm per .999 fineness 10gm per .999 fineness 10gm per .999 fineness

Delivery Centre Mumbai Mumbai and Ahmadabad Ahmadabad, Delhi,Chennai, Kochi, Mumbai,

Indore and Kolkata

Delivery Size 1000gm(+/- 5%) 1000gm 100gm

Quality Specification .996 fineness 996 fineness 999 fineness

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Consumption Pattern

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GOLD PRICES IN FLUCTUATION IN PAST FEW YEARS

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Gold prices reflect:Gold prices reflect:

Inherent value of gold

Relative strength of the currency in which it is

quoted

Price trends

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Updated Monthly; last updated 1st November 2010

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Updated Monthly; last updated 1st November 2010

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Supply/demandSupply/demand

Central banks andCentral banks andInternational monetary fundsInternational monetary funds

InterestInterest raterate

Modifications in exchangeModifications in exchange

raterateMarket FearMarket Fear

Market GreedMarket Greed

PoliticalPolitical condition of thecondition of the

worldworld e.g. warse.g. wars

Factors influencing the value of goldFactors influencing the value of gold

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World of Gold: the safe heavenWorld of Gold: the safe heaven

The Psychological Influence:

Gold is a symbol of wealth and good fortune

since almost the birth of the first business. What makes it specific compared to other commodits is

the fact that it is commonlycommonly seen as a safesafe heavenheaven.

Everyone agrees and everyone is strengthening this

inherent value If there is a loss of trust in financial products, there will

always be the solution to turn to this safesafe investmentinvestment

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Competition from substitutesCompetition from substitutes

Simple definition ofsubstitute:

One that takes the place

of another...

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In gold we trust. Gold is rare andIn gold we trust. Gold is rare and

essential. Gold is valuable.essential. Gold is valuable.To be competitive, substitutes have to be atTo be competitive, substitutes have to be at

the same levelthe same level

Gold is rare and not easily workable...

... So is crude oil

as Uraniumor Platinum

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THANK YOU