University Of Mumbai Project Report On:

( Gold trading in commodity market)

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF

BACHELOR OF MANAGEMENT STUDIES (BMS)V Semester(2011-2012)

Submitted By:

Reshma panicker

Under Guidance Of:

PROF MS. Anita Yadav

JVM MEHTA DEGREE COLLEGE OF ARTS, SCIENCE AND COMMERCEAIROLI

NAVI MUMBAI – 400708

DECLARATION

I, RESHMA PANICKER , studying in TYBMS of JVM college of arts, science and commerce, hereby declare that I have completed this project on (Gold trading in commodity market)) in the year 2011-2012 as per the requirement of Mumbai University as part of BMS program. The information presented to this project is true and original to the best of my knowledge.

DATE:

PLACE: NAVI MUMBAI (AIROLI)

RESHMA

PANICKER

ACKNOWLEDGEMENT

It has always been my sincere desire as a management student to get an

opportunity to express my views, skills, attitude and talent which I am proficient. A

project is one such avenue through which a student who aspires to be a future

manager does something creative.

I am extremely grateful to the university of Mumbai for having a prescribed this

project work to me as a part of the academic requirement in the bachelor of

management (BMS) course.

I wish to appreciate the JVM management for providing the state of the art

facilities, the principal Mrs. Bhagyashri Dabake for her dynamic leadership and

library staff for their support in providing academic content, and the teaching and

supporting staff of JVM college, for providing the entire state of the art infrastructure

and resources to enable the completion and enrichment of my project.

I wish to extend a special thanks to project guide; Miss SUDHA SINGH

without whose guidance; the project may not have taken shape.

Reshma panicker

GOLD TRADING IN COMMODITY MARKET :

DETERMINATION OF PRICE VOLATILITY OF THE GOLD

PRICE IN FUTURE CONTRACT

WITH REFERENCE TO GOLD TRADING IN COMMODITIY MARKET

RESHMA. R. PANICKER.

TYBMS.

BACHELOR OF MANAGEMENT STUDIES.

JVM MEHTA COLLEGE.

Chp. No. Topics Pg. No.1.

2.

3.

4.

5.

Introduction:

Commodities Exchange Trading ( An Overview):2.1. Commodity2.2. Commodity Market 2.3.The Reason Why People Trade in Commodity market

Hedging SpeculatingArbitrage

2.4Market development2.5.Role of commodity trading Exchange2.6. Participants of Commodity MarketHedgersSpeculatorsArbitrage2.7. Derivatives2.8.Types of Derivative MarketForward Contract Future Contract2.9. Determination of Future Price2.10. Advantages and Disadvantages of Future s Trading.2.11. margin requirement and settings212. commodities exchanging trading regulations IN India2.13 leading commodity markets in India2.14.leading commodity markets in world

Company Profile

Gold

1- 5

6-26

26-36

36- 54

55- 62

63.

Analysis

Observation.

Chapter – I

INTRODUCTION

INTRODUCTION

Ever since the dawn of civilization commodities trading have

become an integral part in the lives of mankind. The very reason for this

lies in the fact that commodities represent the fundamental elements of

utility for human beings. The term commodity refers to any material, which

can be bought and sold. Commodities in a market’s context refer to any

movable property other than actionable claims, money and securities. Over

the years commodities markets have been experiencing tremendous

progress, which is evident from the fact that the trade in this segment is

standing as the boon for the global economy today. The promising nature of

these markets has made them an attractive investment avenue for investors.

In the early days people followed a mechanism for trading called

Barter System, which involves exchange of goods for goods. This was the

first form of trade between individuals. The absence of commonly accepted

medium of exchange has initiated the need for Barter System. People used

to buy those commodities which they lack and sell those commodities

which are in excess with them. The commodities trade is believed to have

its genesis in Sumeria. The early commodity contracts were carried out

using clay tokens as medium of exchange. Animals are believed to be the

first commodities, which were traded, between individuals. The

internationalization of commodities trade can be better understood by

observing the commodity market integration occurred after the European

Voyages of Discovery. The development of international commodities

trade is characterized by the increase in volumes of trade across the nations

and the convergence and price related to the identical commodities at

different markets. The major thrust for the commodities trade was provided

by the changes in demand patterns, scarcity and the supply potential both

within and across the nations.

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 organized 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.

India has a long history of commodity futures trading, extending

over 125 years. Still, such trading was interrupted suddenly since the mid-

seventies in the fond hope of ushering in an elusive socialistic pattern of

society. As the country embarked on economic liberalization policies and

signed GATT agreement in the early nineties, the government realized the

need for futures trading to strengthen the competitiveness of Indian

agriculture and the commodity trade and industry. Futures trading began to

be permitted in several commodities, and the ushering in of the 21 st century

saw the emergence of new National Commodity Exchanges with

countrywide reach for trading in almost all primary commodities and their

products.

Chapter - II

“COMMODITIES EXCHANGE TRADING”

AN

OVERVIEW

2.1. COMMODITY

Commodity includes all kinds of goods. FCRA [ Forward

Contract(Regulation) Act,1952] defines “goods” as “every kind of movable

property other than actionable claims, money and securities”. Futures

trading is organized in such goods or commodities as are permitted by the

central Government. At present, all goods and products of agricultural

(including plantation), mineral and fossil origin are allowed for futures

trading under the auspices of the commodity exchange recognized under

the FCRA. The National commodity exchange have been recognized by

the central Government for organized trading in all permissible

commodities which include precious metals ( Gold & Silver ) and non-

ferrous metals; cereals and pulses; ginned and un-ginned cotton; oilseeds,

oils and oilcakes; raw jute and jute goods; sugar and guar; potatoes and

onions; coffee and tea; rubber and spices, etc.

2.2. COMMODITY MARKET

Commodity market is an important constituent of the financial

markets of any country. A commodity exchange or market is a common

platform, where market participants from varied spheres trade in wide

spectrum of commodity derivatives.

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. It is important to develop a vibrant, active and liquid

commodity market. This would help investors hedge their commodity risk,

take speculative positions in commodities and exploit arbitrage

opportunities in the market.

In simpler terms, it is a place where one can determine the price of

contracts on a current date, for goods to be transacted in future.

For example,

One can determine the price of goods to be transacted in the month

of October 2008 or even later in December 2008 through this mechanism,

thereby helping people to avoid fluctuations in the price of commodities.

2.3. THE REASON WHY PEOPLE TRADE IN COMMODITIES

MARKET:

HEDGING

Hedging is a mechanism by which the participants in the physical /

cash markets can cover their price risk. Theoretically, the relationship

between the futures and cash prices is determined by cost of carry. The two

prices move in tandem, enabling the participants in the physical / cash

markets to cover their price risk by taking opposite position in the futures

market.

SPECULATING

Speculating are participants who are willing to take risks in the

expectation of making profit. Any person, who feels that the market will

move in one direction, can thus take a position in the market. The primary

role of speculators is to provide liquidity to the market.

ARBITRAGING

Arbitraging is primarily done in two different ways to make profit

from the futures market.

– Simultaneously purchase and sale goods in two different markets so that the

selling price is higher than the buying price by more than the transaction

cost, thereby enabling a person to make risk-less profits.

– Simultaneously purchase / sale in the spot market and sale / purchase in the

futures markets so that selling price is higher than the buying price by more

than the transaction cost & the interest cost, again resulting in risk-less

profits.

2.4. MARKET DEVELOPMENT

In the context of the development of commodities markets,

integration plays a pivotal role in surmounting the barriers of trade. The

development of trading mechanisms in the commodities market segment

largely helped the integration of commodities markets. The major thrust for

the integration of commodities trading was given by the European

discoveries and the march of the world trade towards globalization. The

commodities trade among different countries was originated much before

the voyages of Columbus and Da Gama. During the first half of the second

millennium India and China had trading arrangements with Southeast Asia,

Eastern Europe, the Islamic countries and the Mediterranean. The

advancements in shipping and other transport technologies had facilitated

the growth of the trade in this segment. The unification of the Eurasian

continent by the Mongols led to a wide transmission of people, ideas and

goods. Later, the Black Death of 1340s, the killer plague that reduced the

population of Europe and Middle East by one-third, has resulted in more

per capita income for individuals and thus increased the demand for Eastern

luxuries like precious stones, spices, ceramics and silks. This has

augmented the supply of precious metals to the East. This entire scenario

resulted in the increased reliance on Indian Ocean trade routes and

stimulated the discovery of sea route to Asia.

The second half of the second millennium is characterized by the

connectivity of the markets related to the Old and the New worlds. In the

year 1571, the city of Manila was found, which linked the trade between

America, Asia, Africa ad Europe. During the initial stages, because of the

high transportation costs, preference of trade was given to those

commodities, which had high value to weight ratio. In the aftermath of the

discoveries huge volumes of silver was pumped into world trade. With the

discovery of the Cape route, the Venetian and Egyptian dominance of spice

exports was diluted. The introduction of New world crops into China has

lead to the increased demand for silver and a growth in exports of tea and

silk. Subsequently, Asia has become the prime trader of spices and silk and

Americas became the prominent exporter of silver.

Earlier investors invested in those companies, which specialized in

the production of commodities. This accounted for the indirect investments

in commodity assets. But with the establishment of commodity exchanges,

a shift in the investment patterns of individuals has occurred as investors

started recognizing commodity investments as an alternative investment

avenue. The establishment of these exchanges has benefited both the

producers and traders in terms of reaping high profits and rationalizing

transaction costs. Commodity exchanges play a vital role in ensuring

transparency in transactions and disseminating prices. The commodity

exchanges ensured the standard of trading by maintaining settlement

guarantee funds and implementing stringent capital adequacy norms for

brokers. In the light of these developments, various commodity based

investment products were created to facilitate trading and risk management.

The commodity based products offer a huge array of benefits that include

offering risk-return trade-offs to investors, providing information on market

trends and assisting in framing asset allocation strategies. Commodity

investments are always considered as defensive because during the times of

inflation, which adversely affects the performance of commodities and

bonds, commodities provide a defense to investors, maintaining the

performance of their portfolios.

The commodities trade in the 18th and 19th centuries was largely

influenced by the shifts in macro economic patterns, the changes in

government regulations, the advancement in technology, and other social

and political transformations around the world. The 19th century has seen

the establishment of various commodities exchanges, which paved the way

for effective transportation, financing and warehousing facilities in this

arena. In a new era of trading environment, commodities exchanges offer

innumerable economic benefits by facilitating efficient price discovery

mechanisms and competent risk transfer systems.

2.5. ROLE OF COMMODITY TRADING EXCHANGE

Earlier, all the sellers and buyers of a commodity used to come to a

common market place for the trade. Buyer could judge the amount of

produce that year while the seller could judge the amount of demand of the

commodity. They could dictate their terms and hence the counter party was

left with no choice. Thus, in order to hedge from this unfavorable price

movement, need of the commodity exchange was felt.

An exchange designs a contract, which alone would be traded on

the exchange. The contract is not capable of being modified by

participants, i.e., it is standardized. The exchange also provides a trading

platform, which converges the bids and offers emanating from

geographically dispersed locations, thereby creating competitive conditions

for trading. The exchange also provide facilities for clearing, settlement,

arbitration facilities, along with a financially secure environment by putting

in a place suitable risk management mechanism and guaranteeing

performance of contract.

2.6. PARTICIPANTS OF COMMODITY MARKET

For a market to succeed, it must have all three kinds of participants

- hedgers, speculators and arbitragers. The confluence of these

participants ensures liquidity and efficient price discovery on the market.

Commodity markets give opportunity for all three kinds of participants.

Hedgers

Many participants in the commodity futures market are hedgers.

They use the futures market to reduce a particular risk that they face. This

risk might relate to the price of any commodity that the person deals in. The

classic hedging example is that of wheat farmer who wants to hedge the

risk of fluctuations in the price of wheat around the time that his crop is

ready for harvesting. By selling his crop forward, he obtains a hedge by

locking in to a predetermined price.

Hedging does not necessarily improve the financial outcome;

indeed, it could make the outcome worse. What it does however is, that it

makes the outcome more certain. Hedgers could be government

institutions, private corporations like financial institutions, trading

companies and even other participants in the value chain, for instance

farmers, extractors, ginners, processors etc., who are influenced by the

commodity prices.

There are basically two kinds of hedges that can be taken. A

company that wants to sell an asset at a particular time in the future can

hedge by taking short futures position. This is called a short hedge. A short

hedge is a hedge that requires a short position in futures contracts. As we

said, a short hedge is appropriate when the hedger already owns the asset,

or is likely to own the asset and expects to sell it at some time in the future.

Similarly, a company that knows that it is due to buy an asset in the

future can hedge by taking long futures position. This is known as long

hedge. A long hedge is appropriate when a company knows it will have to

purchase a certain asset in the future and wants to lock in a price now.

Speculators

If hedgers are the people who wish to avoid price risk, speculators

are those who are willing to take such risk. These are the people who takes

positions in the market & assume risks to profit from price fluctuations in

fact the speculators consume market information make forecasts about the

prices & put money in these forecasts. An entity having an opinion on the

price movements of a given commodity can speculate using the commodity

market. While the basics of speculation apply to any market, speculating in

commodities is not as simple as speculating on stocks in the financial

market. For a speculator who thinks the shares of a given company will

rise, it is easy to buy the shares and hold them for whatever duration he

wants to. However, commodities are bulky products and come with all the

costs and procedures of handling these products. The commodities futures

markets provide speculators with an easy mechanism to speculate on the

price of underlying commodities.

Arbitrage

A central idea in modern economics is the law of one price. This

states that in a competitive market, if two assets are equivalent from the

point of view of risk and return, they should sell at the same price. If the

price of the same asset is different in two markets, there will be operators

who will buy in the market where the asset sells cheap and sell in the

market where it is costly. This activity termed as arbitrage. The buying

cheap and selling expensive continues till prices in the two markets reach

equilibrium. Hence, arbitrage helps to equalise prices and restore market

efficiency.

2.7. DERIVATIVES

Another major leap in the development of commodities markets is

the growth in commodities derivative segment. Derivatives trading has a

long history. The first recorded incident of commodities trade was traced

back to the times of ancient Greece. In the year 1688 De la Vega reported

the trading in 'time bargains' which were the then commonly used terms for

options and futures. Though the first recorded futures trade was found to

have happened in Japan during the 17th century, evidences reveal that the

trading in rice futures was existent in China, 6000 years ago. Derivatives

are useful for both the producers and the traders for the mitigation of risk in

their business. Trading in futures is an outcome of the mankind's efforts

towards maintaining the supply balance of seasonal commodities

throughout the year. Farmers derived the real benefits of derivatives

contracts by assuring the prices they want to procure on their products.

The volatility of prices has made the commodity derivatives not

only significant risk hedging instruments but also strategic exchange traded

assets. Slowly, traders and speculators, who never intended to take the

delivery of goods, entered this segment. They traded in these instruments

and made their margins by taking the advantage of price volatility in

commodity markets.

The dawn of the 21st century brought back the good times for

commodity markets. With the end of a 20 year bear market for

commodities, following the global economic recovery and increased

demand from China and other developing nations, has revitalized the

charisma of commodities markets. According to the forecasts given by

experts commodities markets are likely to experience a bright future with

the depreciation in the value of financial assets. Furthermore, increasing

global consumption, declining U.S. Dollar value, rising factor-input costs

and the recent recovery of the market from the clutches of bear trend are

considered to be the positive symptoms, which contribute to the

acceleration of growth in commodity markets segment.

Meaning of Derivatives:

A derivative is a product whose value is derived from the value of one

or more underlying variables or assets in a contractual manner. The

underlying asset can be equity, forex, commodity or any other asset.

In other words, Derivative means having no independent value. i.e.

the value is derived from the value of the underlying asset. Derivative

means a forward, future, option or any other hybrid contract of

predetermine fixed duration, linked for the purpose of contract fulfillment

to the value of a specified real of financial asset or to an index securities.

Thus, a derivative contract is an enforceable agreement whose value is

derived from the value of an underlying asset. The four most common

examples of derivative instruments are forwards, futures, options and swaps

/ spreads.

2.8. TYPES OF DERIVATIVE CONTRACTS

FORWARD CONTRACT

A forward contract is an agreement between two parties to buy or sell

the underlying asset at a future date at today’s future price. Forward

contract is very valuable in hedging and speculation. It can help a farmer to

hedge himself against any unfavorable movement of the price of his crop

by forward selling his harvest at a known price.

FUTURES CONTRACT

A futures contract is a contract traded on a futures exchange for the

delivery of a specified commodity at a specified future time. The contract

specifies the item to be delivered and the terms and conditions of delivery.

Future contract is alone executed in the commodity exchange trading.

What is the different between the futures contracts and forward

contracts?

Following are some of the basic differences between the futures and

forward contract:

– While futures contracts are traded on the exchange, forwards

contracts are traded over-the-counter market.

– In case of futures contracts, the exchange specifies the standardize

features of the contract, while no predetermined standards are there in the

forward contracts.

– The exchange provides the mechanism that gives the two parties a

guarantee that the contract will be honored whereas there is no surety /

guarantee of the trade settlement in case of forward contract.

2.9.DETERMINATION OF FUTURE PRICE

Futures prices evolves form the interaction of bids and offers emanating

from all over the country – which converge in the trading floor or the

trading engine. The bid and offer prices are based on the expectations of

prices on the maturity date.

How do professionals predict prices in futures

Futures price evolve form the interaction of bids and offers emanating from

all over the country – which converge in the trading floor or the trading

engine. The bid and offer prices are based on the expectations of prices on

the maturity date.

There are two methods for predicting futures prices – fundamental analysis

is concerned with basic supply and demand information, such as, weather

patterns, carryover supplies, relevant policies of the government and

agricultural reports.

On the other hands, technical analysis includes analysis of movement of

prices in the past. Many participants use fundamental analysis to determine

the direction of the market, and technical analysis to time their entry and

exit.

2.10. ADVANTAGES AND LIMITATION OF THE FUTURES TRADING

THE ADVANTAGES OF FUTURES TRADING

The main advantages of futures trading are:

i. Leverageii. Ability to go shortiii. Hedgingiv. Portfolio diversificationv. Automated, emotionless tradingvi. Flexible point of entryvii. Predictability

(i) Leverage Trading a futures / commodity contract allows one to trade higher quantity with less money.

(ii) Ability to go short

Most traditional stock mechanisms do not permit traders to short sell

without large account size, or large experience. With futures going short is

as simple and as common as going long. There are also no margin

penalties or additional requirements for going short.

(iii) Hedging

This is beneficial when protecting a stock portfolio by going short

futures, or buying a futures, or other various strategies. This is also very

important for the world producers of commodities such as coffee, where

they can lock in their price for delivery at a price as sometime in the future.

(iv) Portfolio diversification

Trading commodities and futures is probably a great idea for large

investors who can diversify from traditional portfolio models like bonds,

stocks, and cash.

(v) Automated, Emotionless trading

Systems trading helps avoid the risky decisions an investor tends to

make when a strategy in not in place at the time the position is entered.

(vi) Flexible point of entry

Entry timing becomes irrelevant because some trades will go long,

some short, some will reverse, etc. and it really doesn’t matter what market

prices are or what day of the week it is to get started.

(vii) Predictability

Past performance of system trading is no guarantee – but it is a

mighty good predictor over a long period of time. Because results aren’t

based on price appreciation, but rather “catching” appropriate long and

short trades, it’s easy to back-test a system and sees a few years history of

completed trades for that particular market.

LIMITATIONS OF FUTURES TRADING

(i) First they are impersonal contracts traded in exchange and provide little

scope to farmers to choose particular buyers. Commodity futures also play

marginal role in nurturing subsidy chains comprising farmers, processors

and customers.

(ii) Commodity futures market is yet to develop fully as an efficient

mechanism of risk management and price discovery. The volume of

transaction is low and the liquidity is poor. The risk remains high

indicating poor integration with the physical market and inadequate

participation by hedgers. The market are further deficient in infrastructure,

coupled with linkages with financial institutions.

Negative Return

After the gauge dropped 3.78 percent during the period with volatility of 23.772. The S&P GSCI Silver Total

Return Index, which calculates the return to investors of holding a position in the commodity, was the most-

volatile during the second half of 2011 at 55.59, followed by nickel and lead.

Commodity investments may become more volatile in 2012 as central banks grapple with how to support

economies globally, while demand for raw materials including industrial metals and energy may weaken if

Europe enters a recession, said Michael Pento, the president of Pento Portfolio Strategies in Holmdel, New Jersey.

Some members of the U.S. Federal Open Market Committee are leaning toward additional quantitative

easing to support the economy, minutes from the group’s November meeting showed. Euro- region economic

confidence probably dropped to the lowest in more than two years in December, according to a Bloomberg

survey.

“

Volatility is going to be off the charts in 2012 for precious metals and commodities in general,” Pento said. “

We’ll have very, very slow growth worldwide, and we’ll see stagflation persisting in the U.S. and Europe and

in other countries.”

FUTURES TRADING ARE EXTREMELY RISKY

Futures contracts are leveraged investments, meaning that one can

control something more valuable than the amount of money one used to

trade it. With stocks, if one wants to trade 5 shares of Infosys, one would

have to pay an amount equal to 5 times the current share price of insfosys.

With futures, one is able to trade one contract of the nifty that is worth

Rs.3,00,000/- ( based on today’s prices) with only Rs.50,000/- to Rs.60,000

in his account. This type of leverage power can be very dangerous to the

amateur futures trader if used improperly. If traders were placed without

setting protective stop losses, one could lose substantial sum of money.

Although market forces do not impact commodities in the same way they impact stocks, they do

play a role. If an investor has allocated a significant portion of his portfolio into eggs, for example, and a

biological blight renders an entire month’s supply of eggs unusable on one continent, the difference

between the expected performance of the commodity and the dismal reality will cause that investor to lose

substantial amounts of money, depending on the types of contracts that investor has secured.

COMMODITIES SUITABLE FOR FUTURES TRADING

All the commodities are not suitable for future trading and for

conducting futures trading. For being suitable for futures trading the

market for commodity should be competitive, i.e., there should be large

demand for and supply of the commodity – no individual of group of

persons acting in concert should be in a position to influence the demand or

supply, and consequently the price substantially. There should be free from

substantial government control. The commodity should government

control. The commodity should have long shelf-life and be capable of

standardization and gradation.

THE PRINCIPLE FOR DESIGNING A FUTURES CONTRACT

The most important principle for designing a futures contract is to

take into account the systems and practices being followed in the cash

market. The unit of price quotation, unit of trading should be fixed on the

basis of prevailing practices. The base should generally be that quality or

grade which has maximum production. The delivery centers should be

important production or distribution centers. While designing a futures

contract care should be taken that the contract designed is fair to both

buyers and sellers and there would be adequate supply of the deliverable

commodity thus preventing any squeezes of the market.

2.11. MARGIN REQUIREMENTS AND SETTINGS

By collecting margins, the possibility of accumulating loss,

particularly when futures price moves only in one direction, gets

substantially reduced, thereby reducing the risk of default. Thus, margin

requirement is a good faith deposit to help back the traders position. If the

positions goes against him, then he will eventually receive a margin call

requiring a deposit of funds to bring the equity back up to where he began

the trade with, known as the original margin. The respective exchange set

the margin requirements which are 15 – 20 percent of the total value of the

commodity being traded. In certain cases, when prices and volatility rise

sharply the exchanges may raise margin requirements to a higher

percentage of the total value.

The aim of the margin money is to minimize the risk of default by

either party. The amount of initial margin is so fixed as to ensure that the

probability of loss on account of worst possible price fluctuation, which

cannot be met by the amount of ordinary / initial margin, is very low. The

exchanges fix margin rates on the requirement for balancing high security

of contract and low cost of entering into contract. The daily collection of

margin funds ensure that sufficient funds are in place to receive their gains.

Therefore, while futures offers the opportunity to enter into highly

leveraged transactions, the margin system prevents losses as a result of

nonperformance by the other party.

The main types of margins payable on futures contracts are:

Initial / Ordinary margin – It is the amount to be deposited by the market

participants in his margin account with clearing house before they can place

order to buy or sell futures contracts. This must be maintained throughout

the time their position is open and is returnable at delivery, exercise, expiry

or closing out.

Mark-to-market margins - these are payable based on closing prices at the

end of each trading day. These margins will be paid by the buyer if the

price declines and by the seller if the price rises. This margin is worked out

on difference between the closing / clearing rate and the rate of the contract

or the previous day’s clearing rate. The exchange collects these margins

from buyers if the prices decline and pays to the seller and vice versa.

2.12. COMMODITY EXCHANGE TRADING REGULATIONS IN INDIA

Commodity Derivative markets started in India in cotton in 1875

and in oilseeds in 1900 at Bombay. Forward trading in raw jute and jute

goods started at Calcutta in 1912. Forward markets in wheat have been

functioning at Hapur since 1913 and in bullion at Bombay since 1920.

After independence, the Constitution of India brought the subject of stock

exchanges and futures markets into the Union list. As a result, the

responsibility for regulation of commodity futures markets devolved on the

Government of India. A Bill on forward contracts was referred to an expert

committee headed by Prof. A.D.Shroff and select committees of two

successive Parliaments and finally in December 1952, the Forward

Contracts (Regulation) Act, 1952, was enacted. The Act provided for three-

tier regulatory system:

The Forward Markets Commission (FMC) (set up in September 1953) (http://www.fmc.gov.in)

An association recognized by the Government of India on the recommendation of Forward Markets Commission

The Central Government.

Forward Contracts (Regulation) Rules were notified by the Central

Government in July 1954. The Act divides the commodities into three

categories with reference to extent of regulation:

Commodities in which futures trading is prohibited. Commodities in which futures trading can be organized under the auspices

of a recognized association. Commodities that have neither been regulated for being traded under the

recognized association nor prohibited are referred to as free commodities and the

association involved in such free commodities must obtain the Certificate of Registration from the Forward Markets Commission.

In the seventies, most registered trade associations became inactive, as

futures, as well as forward trading in the commodities for which they were

registered, were either suspended or prohibited altogether.

The liberalized policy now 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 declarations in the

2002-2003 Budget indicated the Government’s resolve to put in place a

mechanism of a futures market.

As a follow up, the government issued notifications on 1 April 2003

permitting futures trading in all commodities. The authorities subsequently

granted licenses to three national commodity exchanges: Multi Commodity

Exchange (MCX), National Commodity & Derivatives Exchange

(NCDEX) and National Multi Commodity Exchange of India (NMCE),

which began operations in 2004.

COMMODITY TRADING REGULATOR AND EXCHANGES IN INDIA

DIFFERENT TYPES OF COMMODITIES TRADED

World-over one will find that a market exits for almost all the

commodities known to us. These commodities can be broadly classified

into the following:

PRODUCT

S

COMMODITIES

Precious

Metals

Gold, Silver, Platinum etc

Other

Metals

Nickel, Aluminum, Copper etc

Agro-Based

Commoditie

s

Wheat, Corn, Cotton, Oils,

Oilseeds.

Soft

Commoditie

s

Coffee, Cocoa, Sugar etc

Live-Stock Live Cattle, Pork Bellies etc

Energy Crude Oil, Natural Gas,

Gasoline etc

DIFFERENT SEGMENTS IN COMMODITIES MARKET

The commodities market exits in two distinct forms namely the Over

the Counter (OTC) market and the Exchange based market. Also, as in

equities, there exists the spot and the derivatives segment. The spot markets

are essentially over the counter markets and the participation is restricted to

people who are involved with that commodity say the farmer, processor,

wholesaler etc. Derivative trading takes place through exchange-based

markets with standardized contracts, settlements etc.

Gold Traders Most Bullish in Month After Bear Market Averted:

Commodities

Gold traders are the most bullish in a month as Europe’s deepening debt crisis and increasing

tensions over Iran drove the metal to its longest winning streak since October.

Ten of 22 surveyed by Bloomberg expect the metal to gain next week and five were neutral, the

highest proportion since Dec. 9. The U.S. Mint sold 45,500 ounces of American Eagle gold coins

this month, compared with 65,500 ounces in the whole of December and 41,000 in November, data

on its website showed.

Britain and France will press the European Union to stop Iranian crude imports at a Jan. 30 meeting,

in response to the country’s nuclear program. Iran is threatening to retaliate by blocking the Strait of

Hormuz, a key chokepoint for global oil supplies. Greek Prime Minister Lucas Papademos warned

his nation may face economic collapse as soon as March. Investors are holding (.GLDTONS) a

near-record amount of gold through exchange-traded products after the metal rose for an 11th

consecutive year.

“European sovereign-debt risk and the geopolitical risk of the Iranian situation escalating should

support gold,” said Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage

that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. “Gold’s safe-haven

attributes will continue to be in demand.”

Annual Gain

Bullion rose 10 percent last year, beating the 1.2 percent decline in the Standard & Poor’s GSCI

Total Return Index of 24 commodities and the 9.4 percent retreat in the MSCI All-Country World

Index of equities. Treasuries returned 9.8 percent last year, a Bank of America Corp. index shows.

The metal, which traded at $1,619.87 an ounce at 1:40 p.m. in London, fell almost 19 percent from

its record closing price of $1,900.23 on Sept. 5 through Dec. 29, within 1 percentage point of the

common definition of a bear market. Gold rallied 5 percent in five days ended yesterday, the longest

run of gains since October.

Traders also anticipate advances in raw sugar, corn and soybeans next week. Copper may decline,

the surveys showed.

Holdings in bullion-backed ETPS reached 2,355.3 metric tons on Jan. 4, within 2 percent of the all-

time high set Dec. 13, data compiled by Bloomberg show. The hoard, valued at $121.7 billion,

exceeds the reserves of all but four central banks.

Money Managers

Hedge funds and other money managers cut bets (.MMGCNET) on higher prices to 111,919 futures

and options in the week ended Dec. 27, the lowest since January 2009, U.S. Commodity Futures

Trading Commission data show. The drop preceded the rally in prices. The last time the net-long

position was that low, prices climbed about 16 percent in the next four weeks.

The U.S. and its allies are tightening restrictions on Iran, accusing it of a covert plan to build nuclear

weapons, a charge Iran’s government denies. About one in six barrels of oil traded worldwide flows

through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.

Brent crude may rally 11 percent to $125 a barrel should the EU ban imports of Iranian oil,

according to Societe Generale SA. Some investors buy gold as a hedge against faster inflation,

which may quicken if oil prices advance..

Buying Gold

The banks were also buying gold in 1980 as prices rose to a then-record $850, only to drop for most

of the next 20 years. Bullion tripled from 1999 through the beginning of 2008 as the banks sold

more than 4,000 tons. Bullion may reach $2,140 this year, according to 44 analysts, traders and

investors surveyed by Bloomberg at the end of 2011.

Nine of 17 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal

for delivery in three months, the London Metal Exchange’s benchmark contract, declined 21 percent

last year and was at $7,525 a ton.

Raw sugar retreated 27 percent last year and was at 23.32 cents a pound on ICE Futures U.S. in New

York. Eleven of 13 people surveyed expect prices to climb next week.

Ten of 20 anticipate higher corn prices, while nine of 21 said soybeans will advance. Corn rose 2.8

percent last year and was at $6.48 a bushel in Chicago. Soybeans were at $12.1675 a bushel after

sliding 14 percent in 2011.

“We’ve still got significant hurdles to be jumped in the next couple of months,” Peter Hickson, a

commodities strategist at UBS AG, said in an interview yesterday on Bloomberg Television’s “First

Look.” “Some time toward the end of the first quarter into the second quarter I think people will

become more optimistic about the second half of the year.”

2.13. LEADING COMMODITY MARKETS OF WORLD

Some of the leading exchanges of the world are

New York Mercantile Exchange (NYMEX),

The London Metal Exchange (LME) and

The Chicago Board of Trade (CBOT).

2.14. LEADING COMMODITY MARKETS OF INDIA

The government has now allowed national commodity exchanges,

similar to the BSE & NSE, to come up and let them deal in commodity

derivatives in an electronic trading environment. These exchanges are

expected to offer a nation-wide anonymous, order driven, screen based

trading system for trading. The Forward Markets Commission (FMC) will

regulate these exchanges.

Consequently four commodity exchanges have been approved to

commence business in this regard. They are:

Multi Commodity Exchange (MCX) located at Mumbai.

National Commodity and Derivatives Exchange Ltd (NCDEX) located

at Mumbai.

National Board of Trade (NBOT) located at Indore.

National Multi Commodity Exchange (NMCE) located at Ahmedabad.

Chapter - III

COMPANY PROFILE

3.1. GEOJIT FINANCIAL SERVICES LTD-AS SERVICES PROVIDER

Mr. C.J. George and Mr. Ranajit Kanjilal founded Geojit as a

partnership firm in the year 1987. In 1993, Mr. Ranajit Kanjilal retired

from the firm and Geojit became a proprietary concern of Mr. C. J George.

In 1994, it became a Public Limited Company by the name Geojit

Securities Ltd. The kerala State Industrial Development Corporation Ltd.

(KSIDC), in 1995, became a co-promoter of Geojit by acquiring 24% stake

in the company, the only instance in India of a government entity

participating in the equity of a stock broking company. Geojit listed at The

Stock Exchange, Mumbai (BSE) in the year 2000. In 2003, the company

was renamed as Geojit Financial services Ltd. (GFSL). The board of the

company consists of professional directors, including a Kerala government

nominee with 2/3rd of the board members being Independent Directors.

With effect from July 2005, the company is also listed at The National

Stock Exchange (NSE). Geojit is a charter member of the Financial

Planning Standards Board of India and is one of the largest DP brokers in

the country.

3.2. Overseas Joint Venture

Barjeel Geojit Securities, LLC, Dubai, is a joint venture of Geojit

with Al Saud Group belonging to Sultan bin Saud Al Qassemi having

diversified interests in the area of equity markets, real estates and trading,

Barjeel Geojit is a financial intermediary and the first licensed brokerage

company in UAE. It has facilities for off-line and on-line trading in Indian

capital market and also in US, European and Far-Eastern capital markets. It

also provides Depositary services and deals in Indian and International

Funds. An associate company, Global Financial Investments S.A.O.G

provides similar services in Oman.

Geojit has a tie up with Doha Bank in Qatar, which offers capital

market services from the Indian Desk.

3.3. MILESTONE

The company crossed the following miestones to reach its present position as a leading retail broking house in India.

1986 Geojit becomes a member of the Cochin Stock Exchange.

1994 The Kerala State Industrial Development Corporation (KSIDC), an

arm of the Government of Kerala, becomes a co-promoter of the company by acquiring 24% equity stake in Geojit Financial Services Ltd., based on the evaluation report of Ernst & Young. This is the only venture in India

where a state owned development institution is participating in the equity of a stock broking company. Geojit becomes a corporate broking house.

1995 Geojit comes cut with a small Initial Public Offer (IPO) of Rs.9.5

million, which was oversubscribed by 15 times. Geojit’s issued and subscribed equity capital increased to Rs.30 million and KSIDC’s equity stake comes down to 17%.

Geojit becomes a member of the National Stock Exchange (NSE) and installs its first trading terminal in Cochin, Kerala.

1996 The company launches Portfolio Management Services after obtaining

required registration (Portfolio Management) from Securities Exchange Board of India (SEBI).

1997 Geojit becomes a Depository Participant under National Securities

Depository Limited (NSDL) and begins providing Depository Services through its branches.

1999 Geojit becomes a member of The Stock Exchange, Mumbai (BSE)

and activates Bombay Online Terminals (BOLT) in different branches. The customer base of Geojit crosses the 50,000 mark.

2000 Geojit becomes the first broking in the country to offer online trading

facility. Then, the SEBI Chairman. Mr. D.R.Mehta inaugurates the facility on 1st February 2000.

Commences Derivative Trading after obtaining registration as a Clearing and Trading Member in NSE.

2001 Becomes India’s first DP to launch depository transactions through

internet. Establishes Joint Ventures in the UAE for serving NRI clients.

2002

Geojit ties up with MetLife for the marketing and distribution of insurance products across the country.

The company becomes the first online brokerage house to launch integrated Internet trading system for both cash and derivatives segments.

Sheikh Sultan Bin Saud al Oassemi, a member of the ruling family of sharjah, WE, joins the Board of Directors of Geojit.

2003 Geojit Commodities Limited, a wholly owned subsidiary of Geojit,

becomes member of National Multi-Commodity Exchange of India Ltd., National Commodity & Derivatives Exchange Ltd., Multi Commodity Exchange and launches Commodity Futures Trading in rubber, pepper, gold. wheat and rice.

Geojit Commodities Limited launches Online Futures Trading in multiple commodities namely, agri-commodities, precious metals like gold and silver, other metals like steel, aluminum,etc. and energy futures namely, crude oil and furnace oil.

Geojit raises more than Rs.100 million through issue of preferential shares.

2005 Barjeel Geojit Securities LLC becomes a member of Dubai Gold

Commodity Exchange. Geojit Credits, a subsidiary of Geojit Financial Services Ltd. registers

with Reserve Bank of India as a Non-Banking Financial Company (NBFC). The Company gets listed on National Stock Exchange of India

Limited. The Company implements Employees Stock Option Scheme. The Company opens a first of its kind-all women’s branch in cochin.

2006 Geojit relaunches Internet trading on Reuters TIB Mercury Platform.

2007 Geojit joint venture with BNP Paribas to provide Global Financial

services to their customer and now Geojit become Geojit BNP Paribas Limited.

3.4. Services Provided by Geojit Financial Services Ltd.

PRODUCTS

Internet Trading

Geojit, a member of NSE and BSE, has a network of over 300

branches in India and abroad, rendering quality equity trading services.

Geojit not only has a strong offline presence but also provides automated

online trading services.

Geojit also provides a Call & Trade facility to its customers

wherein they can place and track their orders through our dedicated Call

Center Desk by dialing the toll free number.

Geojit’s retail spread caters to the need of individual investors.

Trading in equities is made simple, safe and interesting with smart advice

from the research desk through daily SMS alerts, market pointers,

periodical research reports, stock recommendations and customer meets

organized frequently.

The online trading system allows customers to track the markets

by setting up their own market watch, receiving research tips, stock alerts,

real-time charts and news and many more features enable the customer to

take informed decisions.

The brokerage structure makes Geojit’s Online Trading all the more attractive:

Types of trading platform

We can choose the trading platform that suits you best. Geojit offers three versions to meet customer needs:

Gold Silver Platinum

Silver

Gold and Silver platforms are quite similar as they are both web-based. In

Silver version the feeds are updated every minute and not real-time as in

the Gold platform. However, one can click the refresh button as many times

to view the latest stock prices. There are no minimum brokerage charges

for this platform. A normal investor who does not engage in speculative

transactions may find the Silver version most suited to his needs.

Gold

This platform is a web-based solution and the customer can login to the

trading platform from anywhere in the world. During Market hours the

stock prices are refreshed seamlessly and the delay in transmission would

be a few seconds, which is mostly dependant on the bandwidth connectivity

used by the customer. In this, the trader will receive live quotes as the rates

are refreshed every second.

Platinum

The Platnium version acts as a virtual dealers terminal providing live

updates and confirmation. The executable program is downloaded on the

customers computer so that he can trade from the comfort of his home /

office. Stock prices are real-time and continuously updated once logged in.

Depository

A depository can be compared to a bank. It holds securities such as

shares, denentures, bonds, government securities, units etc. of investors in

electronic form. There are two depositories in India, The National

Securities Depository Limited (NSDL) and Central Depository Services

Limited (CDSL). An individual who desires avail the depository services

can approach a Depository Participant (DP).

Banks,financial institutions, custodians, brokers or any other entity

eligible as per SEBI (Depositories and Participants) Regulations,1996 can

apply to the Depository to become a Depository Participants. As on 31st

December 2005 there were 221 Depository Participants in India.

Geojit is a Depository participant of NSDL. Investors can open

demat accounts with NSDL through Geojit. One can approach the nearest

branch of Geojit for opening holdings, reports, and ledger and will have

free access to our research reports at any time.

Commodity

Geojit Commodities, a subsidiary of Geojit Financial Services Limited,

is mainly engaged in the business of Commodity Futures Trding. Geojit

Commodities is a member of:

National Multi-Commodity Exchange of India Limited (NMCE)

National Commodity & Derivatives Exchange Limited (NCDEX)

Multi-Commodity Exchange (MCX)

India Pepper and Spice Trade Association (IPSTA)

Singapore Commodity Exchange (SICOM)

Dubai Gold Commodity Exchange (DGCX).

Geojit provides information on commodity futures, along with

technical and fundamental analysis online at its website and also through

the company’s large branch network. The company conducts Seminars,

distributes free-in-house literature and holds interactive sessions that help

raise awareness on the futures market. The number of participants is

continuously on the rise thus leading to increased volumes and market

efficiency.

Geojit Commodity offers futures trading through multiple exchanges in

varied commodities such as:

Agri commodities: oilseeds, soya, groundnut, pulses, rice, wheat, sugar,

spices, rubber, guar, pepper, cardamom, coffee,etc

Precious metals: gold and silver,

Base metals: steel, aluminum, nickel, zinc, copper, etc

Energy products: crude oil and furnace oil

Geojit clientele in commodities rage from investors, co-operative

socities, state and national institutions to dealers, traders, manufacturers,

financiers, speculators, arbitragers, etc.

Geojit does not have proprietary interest in any commodity and therefore is

price neutral. Transaction costs are highly affordable attracting a spectrum

of investors. Membership in multiple exchanges gives clients the added

advantage of arbitrage. Geojit has specialized staff that provide the required

guidance, help and enable clients to enter at the appropriate price.

3.5. TRADING IN COMMODITIES @ GEOJIT

Open a trading account and maintain initial margin with Geojit.’

When an order request is entered for buying/selling for a match with

the existing orders in the Exchange system. If the order matches another

order in the system it results in a trade.

Contract note is issued in the exchange specified format containing

details such as transaction, quantity, price etc. Contract note is a legal

document enforceable in the court of law.

Mark to market margin is levied on the contract.

The open purchase/sale positions can be squared off at any time during

the contract period.

NMCE however does not allow members to enhance their position

during the settlement month. Existing positions can be squared off.

On the first (tenth in case of gold & silver) day of settlement month,

margins on existing position are increased by 20%

From 1st to 15th of the contract month (10th to 15th in case of gold &

silver), seller can tender warehouse receipt for settlement.

This means that the seller has the right to make delivery of the sold

position any time between the 1st to 15th (10th to 15th in case of gold &

silver) of the contract month. The first buyer (as per the exchange records)

shall have to necessarily take delivery of the same. The seller shall receive

payment from the exchange on T+3 day while the buyer has to make

payment on T+1 day. (T is the transaction day)

The seller who places his commodity with Central Warehousing

Corporation (CWC) is issued a CWC receipt against this delivery. This

receipt is accepted by Geojit and sent to the exchange that gives it to the

buyer. The buyer presents it at CWC and takes delivery of his commodity.

Commodity Depository

1. The commodity Depository account can be opened by individuals,

partnerships firms, companies, etc. unlike in the capital market segment

where Partnership firms cannot open the demat account in the firm name.

2. The content of the Agreements shall differ for each category

3. Depository charges differ for each category

4. Only warehouse electronic receipts are considered for the purpose

debiting / crediting depository account

5. Commodities depository account can be availed at both the

Depositories i.e. NSDL and CDSL

6. The Commodities Identification number i.e.INC is akin to the ISIN

The commodities Depository account may be credited in the following situations:

1. Demat2. Revalidation3. Actual purchase from market.

Demat:

If the customer has some commodities with him, he may unload it

in the warehouse and take the warehouse receipt after due verification of

the Assayer appointed by NCDEX AND MCX. To convert the warehouse

receipt in demat form, he has to fill up necessary details in the Commodity

Deposit Form available in the Warehouse. The Warehouse shall inform the

Registrar and Transfer Agents (RTA) with the required details who shall

then arrange to credit the depository account of the customer through

NSDL/CDSL. Currently, there is only one RTA for commodities i.e.

Karvy.

Revalidation:

If the client doesn’t wish to open the DP account then he may trade

directly in the market with the physical warehouse receipts (in MCX AND

NMC) Normally the Warehouse receipt (whether demat or physical) is for

duration of 3 months. After the expiry of 3 months the owner of the receipt

needs to revalidate it. He will request ther Warehouse to revalidate the

receipt. The assayer will examine the commodity and take into account the

wear and tear (normal as well as abnormal) for revalidating the warehouse

receipt

Portfolio Management Services

Geojit, a SEBI registered Portfolio Manager (Reg.

No.INP000000316) offers discretionary portfolio management services.

Geojit has a team of expert’s who carefully take investment decisions

based on the clients’ objectives. The portfolio Management team has a

successful track record of more than 10 years in the capital market. The

team has access to Geojit’s strong Equity Research, and Fundamental &

Technical-analysis.

CHAPTER- 4

GOLD

4.1. INTRODUCTION

Gold is a unique asset based on few basic characteristics. First, it is

primarily a monetary asset, and partly a commodity. As much as two thirds

of gold’s total accumulated holdings relate to “store of value”

considerations. Holdings in this category include the central bank reserves,

private investments, and high-cartage jewelry bought primarily in

developing countries as a vehicle for savings. Thus, gold is primarily a

monetary asset. Less than one third of gold’s total accumulated holdings

can be considered a commodity, the jewelry bought in Western markets for

adornment, and gold used in industry.

The distinction between gold and commodities is important. Gold

has maintained its value in after-inflation terms over the long run, while

commodities have declined.

Some analysts like to think of gold as a “currency without a

country’. It is an internationally recognized asset that is not dependent upon

any government’s promise to pay. This is an important feature when

comparing gold to conventional diversifiers like T-bills or bonds, which

unlike gold, do have counter-party risk.

Gold is a monetary metal whose price is determined by inflation, by

fluctuations in the dollar and U.S. stocks, by currency-related crises,

interest rate volatility and international tensions, and by increases or

decreases in the prices of other commodities. The price of gold reacts to

supply and demand changes and can be influenced by consumer spending

and overall levels of affluence.

Gold is different from other precious metals such as platinum,

palladium and silver because the demand for these precious metals arises

principally from their industrial applications. Gold is produced primarily

for accumulation; other commodities are produced primarily for

consumption. Gold’s value does not arise from its usefulness in industrial

or consumable applications. It arises from its use and worldwide acceptance

as a store of value. Gold is money.

4.2. WHAT MAKES GOLD SPECIAL?

Timeless and Very Timely Investment:

For thousands of years, gold has been prized for its rarity, its beauty, and

above all, for its unique characteristics as a store of value. Nations may rise

and fall, currencies come and go, but gold endures. In today’s uncertain

climate, many investors turn to gold because it is an important and secure

asset that can be tapped at any time, under virtually any circumstances. But

there is another side to gold that is equally important, and that is its day-to-

day performance as a stabilizing influence for investment portfolios. These

advantages are currently attracting considerable attention from financial

professionals and sophisticated investors worldwide.

Gold is an effective diversifier:

Diversification helps protect your portfolio against fluctuations in the value

of any one-asset class. Gold is an ideal diversifier, because the economic

forces that determine the price of gold are different from, and in many

cases opposed to, the forces that influence most financial assets.

Gold is the ideal gift:

In many cultures, gold serves as a family treasure or a wealth transfer

vehicle that is passed on from generation to generation. Gold bullion coins

make excellent gifts for birthdays, graduations, weddings, holidays and

other occasions. They are appreciated as much for their intrinsic value as

for their mystical appeal and beauty. And because gold is available in a

wide range of sizes and denominations, you don’t need to be wealthy to

give the gift of gold.

Gold is highly liquid:

Gold can be readily bought or sold 24 hours a day, in large denominations

and at narrow spreads. This cannot be said of most other investments,

including stocks of the world’s largest corporations. Gold is also more

liquid than many alternative assets such as venture capital, real estate, and

timberland. Gold proved to be the most effective means of raising cash

during the 1987 stock market crash, and again during the 1997/98 Asian

debt crisis. So holding a portion of your portfolio in gold can be invaluable

in moments when cash is essential, whether for margin calls or other needs.

Gold responds when you need it most:

Recent independent studies have revealed that traditional diversifiers often

fall during times of market stress or instability. On these occasions, most

asset classes (including traditional diversifiers such as bonds and alternative

assets) all move together in the same direction. There is no “cushioning”

effect of a diversified portfolio — leaving investors disappointed. However,

a small allocation of gold has been proven to significantly improve the

consistency of portfolio performance, during both stable and unstable

financial periods. Greater consistency of performance leads to a desirable

outcome — an investor whose expectations are met.

4.3. THE REASON WHY INVESTORS OWN GOLD

There are six primary reasons why investors own gold: They may

never be more relevant than they are today.

1. As a hedge against inflation.

2. As a hedge against a declining dollar.

3. As a safe haven in times of geopolitical and financial market instability.

4. As a commodity, based on gold’s supply and demand fundamentals.

5. As a store of value.

6. As a portfolio diversifier.

1. HEDGE AGAINST INFLATION

Gold is renowned as a hedge against inflation. The most consistent

factor determining the price of gold has been inflation - as inflation goes

up, the price of gold goes up along with it. Since the end of World War II,

the five years in which U.S. inflation was at its highest were 1946, 1974,

1975, 1979, and 1980. During those five years, the average real return on

stocks, as measured by the Dow, was -12.33%; the average real return on

gold was 130.4%.

Today, a number of factors are conspiring to create the perfect

inflationary storm: extremely simulative monetary policy, a major tax cut, a

long term decline in the dollar, a spike in oil prices, a huge trade deficit,

and America’s status as the world’s biggest debtor nation. Almost across

the board, commodity prices are up despite the short-term absence of a

weakening dollar which is often viewed as the principal reason for stronger

commodity prices.

Oil, Inflation and Gold

Although the prices of gold and oil don't exactly mirror one another,

there is no question that oil prices do affect gold prices. If oil prices rise or

fall sharply, investors can expect a corresponding reaction in gold prices,

often with a lag.

There have been two major upward moves in the price of gold since

it was freed to float in 1968. The first occurred between 1972 and 1974

when oil prices climbed 325%, from $2.44 to $10.36. During the same

period, gold prices rose 268% (on a quarterly average basis) from $47.45 to

$174.76.

The second major price move occurred between 1978 and 1980,

when oil prices increased 105%, from $12.70 to $26.00. Over the same

period, quarterly average gold prices rose 254% from $178.33 to $631.40.

2. GOLD - HEDGE AGAINST A DECLINING DOLLAR

Gold is bought and sold in U.S. dollars, so any decline in the value

of the dollar causes the price of gold to rise. The U.S. dollar is the world's

reserve currency - the primary medium for international transactions, the

principal store of value for savings, the currency in which the worth of

commodities and equities are calculated, and the currency primarily held as

reserves by the world's central banks. However, now that it has been

stripped of its gold backing, the dollar is nothing more than a fancy piece of

paper.

3. GOLD AS A SAFE HAVEN

Despite the fact that the United States is the world’s only remaining

superpower, there are many problems festering around the world, any one

of which could explode with little warning. Gold has often been called the

"crisis commodity" because it tends to outperform other investments during

periods of world tensions. The very same factors that cause other

investments to suffer cause the price of gold to rise. A bad economy can

sink poorly run banks. Bad banks can sink an entire economy. And, perhaps

most importantly to the rest of the world, the integration of the global

economy has made it possible for banking and economic failures to

destabilize the world economy.

As banking crises occur, the public begins to distrust paper assets

and turns to gold for a safe haven.

When all else fails, governments rescue themselves with the

printing press, making their currency worth less and gold worth more. Gold

has always risen the most when confidence in government is at its lowest.

4. GOLD - SUPPLY AND DEMAND

First, demand is outpacing supply across the board. Gold

production is declining; copper production is declining; the production of

lead and other metals is declining. It is very difficult to open new mines

when the whole process takes about seven years on average, making it hard

to address the supply issue quickly. Gold output in South Africa, the

world's largest gold producer, fell to its lowest level since 1931 this past

year as the rand's gains prompted Harmony Gold Mining Co. and rivals to

close mines despite 16 year highs in the gold price.

Growing Demand - China, India and Gold

India is the largest gold-consuming nation in the world. China, on

the other hand, has the fastest-growing economy in modern history. Both

India and China are in the process of liberalizing laws relating to the import

and sale of gold in ways that will facilitate gold purchases on a huge scale.

China is teaching the West something new. Its economy, growing at

9 percent per year, is expected to become the second largest in the world by

2020, behind only the United States. Last year Americans spent $162

billion more on Chinese goods than the Chinese spent on U.S. products.

That gap has been growing by more than 25 percent per year. China's

consumer class, meanwhile, is spending on everything from bagels to

Bentleys – and will soon outnumber the entire U.S. population. China's

explosive growth "could be the dominant event of this century," says

Stapleton Roy, former U.S. ambassador to China. "Never before has a

country risen as fast as China is doing."

China recently passed legislation that will allow the country's four major

commercial banks to sell gold bars to their customers in the near future.

Currently, individuals in China are only allowed to buy gold-backed

certificates from the Bank of China and the Industrial and Commercial

Bank of China.

5. GOLD – STORE OF VALUE

One major reason investors look to gold as an asset class is because

it will always maintain an intrinsic value. Gold will not get lost in an

accounting scandal or a market collapse. Economist Stephen Harmston of

Bannock Consulting had this to say in a 1998 report for the World Gold

Council,

“…although the gold price may fluctuate, over the very long run gold has

consistently reverted to its historic purchasing power parity against other

commodities and intermediate products.

Historically, gold has proved to be an effective preserver of wealth.

It has also proved to be a safe haven in times of economic and social

instability. In a period of a long bull run in equities, with low inflation and

relative stability in foreign exchange markets, it is tempting for investors to

expect continual high rates of return on investments. It sometimes takes a

period of falling stock prices and market turmoil to focus the mind on the

fact that it may be important to invest part of one’s portfolio in an asset that

will, at least, hold its value.”

Today is the scenario that the World Gold Council report was referring to

in 1998.

6. GOLD - PORTFOLIO DIVERSIFIER

The most effective way to diversify your portfolio and protect the

wealth created in the stock and financial markets is to invest in assets that

are negatively correlated with those markets. Gold is the ideal diversifier

for a stock portfolio, simply because it is among the most negatively

correlated assets to stocks.

Investment advisors recognize that diversification of investments

can improve overall portfolio performance. The key to diversification is

finding investments that are not closely correlated to one another. Because

most stocks are relatively closely correlated and most bonds are relatively

closely correlated with each other and with stocks, many investors combine

tangible assets such as gold with their stock and bond portfolios in order to

reduce risk. Gold and other tangible assets have historically had a very low

correlation to stocks and bonds.

Although the price of gold can be volatile in the short-term, gold

has maintained its value over the long-term, serving as a hedge against the

erosion of the purchasing power of paper money. Gold is an important part

of a diversified investment portfolio because its price increases in response

to events that erode the value of traditional paper investments like stocks

and bonds.

4.4. TRADING PARAMETERS FOR GOLD IN COMMODITY EXCHANGE MARKET

Authority

Trading of Gold futures may be conducted under such terms and conditions as specified in the Rules, Byelaws & Regulations and directions of the Exchange issued from time totime.

Unit of Trading

The unit of trading of Gold shall be 1 Kg and 100gm mini lot. Bids and offers may be accepted in lots of Gold shall be 1 Kg or multiples thereof.

Months Traded In

Trading in Gold futures may be conducted in the months as specified by the Exchange from time to time.

Tick Size

The tick size of the price of Gold shall be Re. 1.00.

Basis Price

The basis price of Gold shall be Ex-Mumbai inclusive of Customs Duty and Octroi, excluding Sales Tax.

Unit for Price Quotation

The unit of price quotation for Gold shall be in Rupees per 10 gms of Gold with 995 Fineness.

Hours of Trading

The hours of trading for futures in Gold shall be as follows:• Mondays through Fridays – 10.00 AM to 11.30 PM• Saturdays – 10.00 AM to 02.00 PMOr as determined by the Exchange from time to time. All timings are as per IndianStandard Timings (IST)

Last Day of Trading

Last day of trading for Gold shall be 20th calendar day of contract month, if 20th happens to be a holiday or a Saturday or a Sunday, then the previous working day, which is other than a Saturday. Mark to Market

The outstanding positions in futures contract in Gold would be marked to market dailybased on the Daily Settlement Price (DSP) as determined by the Exchange.

Position limits

At the commodity level, the member-wise position limit will be a maximum of 6 MT or15% of market-wide open position whichever is higher. The Client-wise position limit will be a maximum of 2 MT. Both position limits will be subject to NCDEX Regulations and directions from time to time. The above position limits will not apply to bona fide hedgers as determined by the Exchange.

Margin Requirements

NCDEX will use Value at Risk (VaR) based margin calculated at 99% confidence interval for one day time horizon. NCDEX reserves the right to change, reduce or levy any additional margins including any mark up margin.

Special Margin

In case of additional volatility, a special margin of at such other percentage, as deemed fit, will be imposed immediately on both buy and sell side in respect of all outstanding positions, which will remain in force for next 2 days, after which the special margin will be relaxed.

Pre-Expiry Additional Margin

There will be an additional margin imposed for the last 2 trading days, including the expiry date of the Gold contract. The additional margin will be added to the normalexposure margin and will be increased by 5% everyday for the last 2 trading days of thecontract.

Delivery Margins

In case of open positions materializing into physical delivery, delivery margins as may bedetermined by the Exchange from time to time will be charged. The delivery margins willbe calculated based on the number of days required for completing the physical deliverysettlement (the look-ahead period and the risks arising thereof).

Arbitration

Disputes between the members of the Exchange inter-se and between members andconstituents, arising out of or pertaining to trades done on NCDEX shall be settled

through arbitration. The arbitration proceedings and appointment of arbitrators shall beas governed by the Bye-laws and Regulations of the Exchange.4.5. DELIVERY PROCEDURES

Unit of Delivery

The unit of delivery for Gold shall be 1 kg.

Delivery Size

Delivery is to be offered and accepted in lots of 1 kg Net only or multiples thereof. Noquantity variation is permitted as per contract specification.

Delivery Requests

The procedure for Gold delivery is based on the contract specifications as per ExhibitIA and Exhibit IB. All the open positions shall have to be compulsorily delivered eitherby giving delivery or taking delivery as the case may be. That is, “upon expiry of the contracts, any seller with open position shall give delivery of the commodity. The corresponding buyer with open position as matched by the process put in place by the Exchange shall be bound to settle by taking physical delivery. In the event of default by seller or buyer to give delivery or take delivery, as the case may be, such defaulting seller or buyer will be liable to penalty as may be prescribed by the Exchange from time to time”.

The Buyers and the Sellers need to give their location preference through the front end of the trading terminal. If the Sellers fail to give the location preference then the allocation to the extent of his open position will be allocated to the base location.

Delivery Allocation

The Exchange would then compile delivery requests received from members on the last

trading day, as specified in Chapter 1 above. The buyers / sellers who have to receive / give delivery would be notified on the same day after the close of trading hours. Deliveryof Gold is to be accepted by Buyers at the accredited warehouse/s where the Seller effects delivery in accordance with the contract specifications.

Gold Delivery

Where Gold is sold for delivery in a specified month, the seller must have requisite electronic credit of such Gold holding in his Clearing Member’s Pool Account before thescheduled date of pay in. On settlement the buyer’s Clearing Member’s Pool Account would be credited with the said delivery quantity on pay out. The Clearing Member is expected to transfer the same to the buyer’s depository account.

Quality Standards

The contract quality for delivery of Gold futures contracts made under NCDEX Regulations shall be Gold conforming to the quality specification indicated in the contract. No lower grade/quality shall be accepted in satisfaction of futures contracts fordelivery except as and to the extent provided in the contract specifications. Delivery of higher grade would be accepted with premium.

Packaging

The gold bars to be accepted at the designated vault shall be directly imported and hallmarked from the approved list of refiners through the approved logistic agency i.e.Brinks Arya India (Pvt.) Ltd. or their affiliates / associates. The Gold bars delivered at theExchange designated vault, indicated in Exhibit 4, should bear the refinery serial no. and

accompanied with the Refinery certificate. Gold held at the NCDEX approved vaults willbe on un -allocated basis i.e. it will be co mingled with those gold bars pertaining to theparticipants of NCDEX. These bars will be of 1 Kg only.

Standard Allowances

No standard allowance is allowed on account of sample testing.

Weight

The quantity of Gold received and or delivered at the NCDEX designated vault would bedetermined / calculated by the weight together with serial number as indicated in theenclosed Refinery certificate submitted at the time of delivery into the designated vaultand would be binding on all parties.

Good / Bad delivery Norms

Gold delivery into NCDEX designated Warehouse would constitute good delivery or baddelivery based on the good / bad delivery norms as per Exhibit 3. The list contained inExhibit 3 is only illustrative and not exhaustive. NCDEX would from time to time reviewand update the good / bad delivery norms retaining the trade / industry practices.

Accredited Assayer

NCDEX has approved the Assayer for quality testing and certification of Gold received at the designated warehouse. The quality testing and certification of Gold will be undertaken only by the approved Assayer. The assayer details are given in the Exhibit 2alongside the warehouses.

Quality Testing Report

Gold delivered into the NCDEX designated vault. This must be accompanied with thecertificate from the LBMA approved Refinery. A specimen of the certificate issued byLBMA approved refinery is posted under Exhibit 6.

Assayer Certificate

Testing and quality certificate issued by NCDEX approved Assayer for Gold delivered atdesignated warehouse in Mumbai, Ahmedabad and at such other locations announcedby the Exchange from time to time shall be acceptable and binding on all parties. Eachdelivery of Gold at the warehouse must be accompanied by a certificate from NCDEXapproved Assayer in the format as per Exhibit 4.

Validity period

The validity period of the Assayer’s Certificate for Gold is till the withdrawal from thewarehouse.

Electronic transfer

Any buyer or seller receiving and or effecting Gold would have to open a depositoryaccount with an NCDEX empanelled Depository Participant (DP) to hold the Gold inelectronic form. On settlement, the buyer’s account with the DP would be credited withthe quantity of Gold received and the corresponding seller’s account would be debited.

The Buyer wanting to take physical delivery of the Gold holding has to make a request inprescribed form to his DP with whom depository account has been opened. The DP would route the request to the warehouse for issue of the physical commodity i.e. Gold to the buyer and debit his account, thus reducing the electronic balance to the extent of Goldso rematerialized.

Charges

All charges and costs payable at the designated warehouse towards delivery of Goldincluding sampling, grading, weighing, handling charges, storage etc. from the date ofreceipt into designated warehouse upto date of pay in & settlement shall be paid by theseller.

No refund for warehouse charges paid by the seller for full validity period shall be givento the seller or buyer for delivery earlier than the validity period. All charges and costs associated & including storage, handling etc. after the pay out shall be borne by the buyer. Warehouse storage charges will be charged to the member / client by the respective Depository Participant. The Assayer charges for testing and quality certification should be paid to the Assayer directly at the delivery location either by cash / cheque / demand draft.

Duties & levies

All duties, levies etc. up to the point of sale will have to be fully borne by the seller andshall be paid to the concerned authority. All related documentation should be completedbefore delivery of Gold into the NCDEX accredited warehouse.

Stamp Duty

Stamp duty is payable on all contract notes issued as may be applicable in the Statefrom where the contract note is issued or State in which such contract note is receivedby the client.

Taxes

Service taxService tax will be payable by the members of Commodity Exchanges on the grossamount charged by them from their clients on account of dealing in commodities.

Sales Tax / VATLocal taxes/ VAT wherever applicable is to be paid by the seller to the sales tax/VATauthorities on all contracts resulting in delivery. Accordingly the buyer will have to paythe taxes/VAT to the seller at the time of settlement. Members and / or their constituents requiring to receive or deliver Gold should register with the relevant tax/VAT authorities of the place where the delivery is proposed to be received / given. In the event of sales tax exemption, such exemption certificate should be submitted before settlement of the obligation. There will be no exemptions on account of resale or second sale in VAT regime.

Premium / Discount

Premium & Discount on the Gold delivered will be provided by the Exchange on the basis of quality specifications:

The Exchange will communicate the premium / discounts amount applicable. Suchamount will be adjusted to the members account through the supplementary settlement.

Grade Premium / (Discount) %

9999 0.49

9990 0.409950 0.00

Formula used = 100 - (Delivery Grade / Standard Grade) * 100, e.g. 100-(0.995/0.9999)*100

4.6. CLEARING AND SETTLEMENT

Daily Settlement

All open positions of a futures contract would be settled daily based on the DailySettlement Price (DSP).

Daily Settlement Prices

The Daily Settlement Price (DSP) will be as disseminated by the Exchange at the end ofevery trading day. The DSP will be reckoned for marking to market all open positions.

Final Settlement Prices

The Final Settlement Price (FSP) will be determined by the Exchange upon maturity ofthe contract. The open positions for which information have been provided for and have been matched by the Exchange, would result in physical delivery.

Spot Prices

NCDEX will announce / disseminate spot prices for Gold relating to the designated delivery center and specified grade/ quality parameters determined through the processof polling a set of market participants representing different segments of the value chainsuch as traders, importers / exporters, processors etc. The polled prices shall be input to a normalizing algorithm (like ‘bootstrapping’ technique) to arrive at a representative, unbiased and clean ‘benchmark’ spot price for

Gold. The security of data and randomness of polling process will ensure transparency and correctness of prices. The Exchange has absolute right to modify the process of determination of spot prices at any time without notice.

Dissemination of Spot Prices

Spot prices for Gold will be disseminated on daily basis.

Pay in and Pay out for Daily Settlement / Final Settlement

The table below illustrates timings for pay in and pay out in case of daily settlement aswell as cash settled positions for final settlement. The buyer clients would have to deposit requisite funds with their respective Clearing Member before “pay in”. All fund debits and credits for the Member would be done in the Member’s Settlement Account with the Clearing bank.

Time (E+1) ActivityOn or before 11.00 hrs - PAYIN - Debit paying member a/c for fundsAfter 13.00 hrs - PAYOUT – Credit receiving member a/c for funds

Pay in and Pay out for final physical settlement

The table below illustrates timings for pay in and pay out in case of positions marked forphysical settlement. The buyers / sellers would have to deposit requisite funds / Goldwith their respective Clearing member before “pay in”.

Pay in and Pay out for Final Settlement in case of physical deliveries Time (E+2) ActivityOn or before 11.00 hrs PAYIN - Debit Buyer Member Settlement a/c for funds - Debit Seller Member’s CM Pool Account for GoldAfter 13.00 hrs PAYOUT - Credit Seller Member Settlement a/c for funds - Credit Buyer Member’s CM Pool Account for Gold

Additionally the supplemental settlement for Gold futures contracts for premium /discount adjustments relating to quality of Gold delivered, actual quantity delivered andclose out for shortages, will also be conducted on the same day. Clearing Members arerequired to maintain adequate fund balances in their respective accounts.

Pay in and Pay out for supplemental settlement

Time (E + 2) ActivityOn or before 16.00 hours - PAY IN - Debit Member Settlement a/c for fundsAfter 18.00 hours - PAY OUT – Credit Member Settlement a/c for funds

Supplementary Settlement for Taxes

The Exchange will conduct a separate supplementary settlement, as illustrated below,two days after normal pay out for completion of tax transactions. In order to facilitate issue of invoice to right parties, the buyer Clearing Members are required to give the buyer client details to the Exchange latest by 15.00 noon on E+3 day.

The amounts due to the above differences will be debited / credited to Member’s clearing bank account similar to normal settlement.

Pay in and Pay out for Taxes Time (E + 4) ActivityOn or before 15.00 hours - PAY IN: Debit Buyer Member Settlement a/c for funds.After 17.00 hours - PAY OUT: Credit Seller Member Settlement a/c for funds

CHAPTER NO. 5

TOP FIVE GOLD MINING COMPANIES

Top five gold producing companies:

The world’s top five producing gold mining companies include:

1.Barrick Gold,2. Goldcorp,3. AngloGold Ashanti3. Newmont Mining Corporation and 5.Kinross Gold Corporation.

Anglogold Ashanti:

Results tagged “AngloGold Ashanti”

Scope of the report

AngloGold Ashanti’s suite of 2010 annual reports includes:

Annual Financial Statements 2010

Mineral Resource and Ore Reserve Report 2010 (PDF - 5.69MB)

Sustainability Report 2010

Annual Review 2010 (PDF - 720KB)

These reports and documents communicate all relevant aspects of AngloGold Ashanti’s operating,

sustainability and financial performance for the 2010 financial year, from 1 January 2010 to 31 December

2010. Those to whom the company seeks to communicate include: shareholders; investors; employees and their representatives; the communities among whom AngloGold Ashanti operates; and regional and national

governments.

The Annual Financial Statements 2010 presents an extensive review of the year in both web-based and

printed formats, and was prepared in accordance with: International Financial Reporting Standards (IFRS);

the South African Companies Act, 61 of 1973 (as amended); and the Listings Requirements of the JSE

Limited (JSE). In compiling the Annual Financial Statements 2010 and the Sustainability Report 2010, the

guidelines on integrated reporting of the King Report on Governance for South Africa 2009 (King III) were

taken into account. This report, which includes a separate Notice of Meeting, is submitted to the JSE in South

Africa, as well as the stock exchanges in London, New York, Ghana, Australia, Paris and Brussels. It is also

submitted to the United States Securities and Exchange Commission (SEC) on a Form 6-K. In compliance

with the rules governing its listing on the New York Stock Exchange and in accordance with the accounting

principles generally accepted in the US, AngloGold Ashanti prepares an annual report on Form 20-F. The

Form 20-F for the 2010 financial year must be filed with the SEC by no later than 30 June 2011.

In the Mineral Resource and Ore Reserve Report 2010, AngloGold Ashanti's Mineral

Resources and Ore Reserves are reported in accordance with the South African Code for Reporting of

Exploration Results, Mineral Reserves and Mineral Resources (SAMREC 2007 Edition) and the Australasian

Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2004). Competent

persons in terms of these codes have prepared, reviewed and confirmed the Mineral Resources and Ore

Reserves reported. The Annual Financial Statements 2010 contains a summary of the group’s Mineral

Resource and Ore Reserve as detailed in the Mineral Resource and Ore Reserve Report 2010. These Ore

Reserves are used in the preparation of the annual financial statements in accordance with IFRS.

The Sustainability Report 2010, Sustainable Gold, provides an account of AngloGold Ashanti’s sustainability

performance in 2010. It covers six key focus areas for 2010:

Improving operational safety performance;

Managing health impacts that arise at our operations and in our

communities;Operating with due respect for human rights;Delivering sustainable economic benefits, including to the communities which host our operations;Recognising and reporting explicitly on exploration and closure in the life cycle of our operations; andConducting effective stewardship of the environment and of the natural resources that we use, primarily land, water and energy.

Guinea's Protectionist New Mining CodeGuinea, the world's largest exporter of bauxite, has adopted a new protectionist mining code giving the nation 35 percent stake in commodities companiesTags: 35, Africa, AngloGold Ashanti, code, digital, energy, Guinea, mine, mining, new, news, percent, protectionist, Vale

AngloGold Ashanti strikes major Tropicana gold, 3.45 million ouncesAngloGold Ashanti receives a major win as the Boards of AngloGold Ashanti

Ltd and Independence Group NL grant approval of the Tropicana Gold Project Development.Tags: AngloGold Ashanti, Australia mining, gold discovery, gold mining, gold projects Australia, Independence Group NL, Major gold projects

Want to know where to invest? These top companies have been in the lead for decades, and are a sure betTags: alcoa, anglo american rio tinto, barrick gold, freeport-mcmoran, goldcorp, newmont mining, teck, top ten mining companies

new mont

Vision

We will be the most valued and respected mining company through industry leading performance.

Values

Act with integrity, trust and respect

Reward creativity, a determination to excel and a commitment to action

Demonstrate leadership in safety, stewardship of the environment and social responsibility

Develop our people in pursuit of excellence

Insist on and demonstrate teamwork, as well as honest and transparent communication

Promote positive change by encouraging innovation and applying agreed upon practices

We remain steadfast in our commitment to sustainable partnerships, both at our operations around the world

and through our corporate philanthropy program in Denver. We each have an obligation to the host

communities in which we operate. We strive to be good stewards of the environment and socially responsible

through our actions. Our goal is to engage with host communities and governments early in the development

of a mine to begin to understand the respective community and share work with it to equitably manage the

value created during the mine operation.

We work with the mining sector, governments and host communities to monitor and work to prevent

corruption. We will comply with all laws relating to our business abroad.

Gold Corp:

LAWRENCE T. KURLANDARA retired top new mont official . He regretted after peru's spy chief

Goldcorp to Release 2011 Fourth Quarter Results on February 15TH; Conference Call and Webcast on February 16 TH :

Goldcorp is one of the world's fastest growing senior gold producers. Its low-cost gold production is located in safe jurisdictions in the Americas and remains 100% unhedged.

A Goldcorp career can take you from the Canadian Shield to the Patagonian plains of Argentina—and wherever you go, you’ll find a vibrant, supportive, performance-driven culture, and consistent Goldcorp principles of sustainable prosperity, workplace safety, environmental stewardship and respect for local cultures.

Why choose Goldcorp?You can grow your career faster. We’re the world’s second largest gold producer, with more than a dozen mining projects in production or under development, and we’re on the path to increase our production by 60% over the next five years. In our offices and operations, we offer unmatched opportunities for advancement.

It’s a culture where you’ll thrive. Goldcorp’s corporate culture is one of drive, excellence and mutual respect. We expect a lot from our people, and we reward them for superior performance.

We offer a balance of teamwork and individuality. Choose Goldcorp and you’ll be teamed with leaders in the industry, equipped with cutting-edge technology, and supported with training and career development. You’ll learn, and you’ll grow. Our teams are aggressive in their pursuit of operational excellence and unified in the quest for personal and professional bests.

Goldcorp entered Andean bid intending to win – CEO

TORONTO (miningweekly.com) – The CEOs of Canada's Goldcorp and Eldorado Gold were playing their cards close for different reasons on Friday, after both companies disclosed they had made takeover offers for TSX- and ASX-listed junior Andean Resources.

Both Goldcorp and Eldorado want to get their hands on Andean's flagship Cerro Negro gold/silver project, a shallow, likely low-cost asset in the Santa Cruz province of Argentina that is expected to grow significantly.

The difference though, is that Goldcorp has locked in a friendly deal with the smaller company, after securing the backing of Andean's board of directors for its C$3,6-billion cash and share offer, and also signed up Andean's biggest shareholder in support of the deal.

Barrick Gold

GALLERYPictures of Barrick Gold's North Mara mine in TanzaniaGlobe and Mail UpdatePublished Thursday, Sep. 29, 2011 6:30PM EDTLast updated Friday, Nov. 25, 2011 1:47PM EST

The energy picture: Coal gets a priorityTuesday, Jan. 03, 2012 4:55PM ESTThe Ridley bulk-handing facility for coal on Ridley Island in Prince Rupert is being expanded even as China's demand for the fuel wanes as its steel making declines

Barrick Gold

Results tagged “Barrick Gold”

Barrick gold mine in TanzaniaGlobe and Mail UpdatePublished Wednesday, Jun. 08, 2011 12:00AM EDTLast updated Wednesday, Jun. 08, 2011 10:48AM EDT1 of 6(David Chancellor/INSTITUTE)Hide captionIntruders fall upon rocks left by a mine truck searching for gold. (North Mara Mine, Tanzania)

(Geoffrey York/Globe and Mail)Hide captionAt the Barrick gold mine at North Mara, Tanzania, a woman pours mercury into her palm. She mixes the mercury with water and rock fragments to seek gold from bits of waste rock at the Barrick mine. Hundreds of local men and women invade the mine every day, seeking pieces of waste rock that might contain gold. Barrick is investigating allegations that about 10 women who trespassed on the mine were sexually assaulted by about a dozen Barrick security guards and Tanzanian police.

(David Chancellor/INSTITUTE)Hide captionIntruders fall upon rocks left by a mine truck searching for gold. (North Mara Mine, Tanzania)

(David Chancellor/INSTITUTE)Hide captionBarrick Private Security vehicle after being stoned by mine intruders. (North Mara Mine, Tanzania)

(David Chancellor/INSTITUTE)Hide captionA Barrick private security officer stands guard at the North Mara mine. While disturbed by what’s happened in Tanzania, Barrick's CEO says shutting down a mine that provides employment and benefits to thousands is not the solution.

(David Chancellor/INSTITUTE)Hide captionA Barrick private security officer stands guard at the North Mara mine. While disturbed by what’s happened in Tanzania, Barrick's CEO says shutting down a mine that provides employment and benefits to thousands is not the solution.

(David Chancellor/INSTITUTE)Hide captionIntruders fall upon rocks left by a mine truck searching for gold. (North Mara Mine, Tanzania)

(Geoffrey York/Globe and Mail)Hide captionAt the Barrick gold mine at North Mara, Tanzania, a woman pours mercury into her palm. She mixes the mercury with water and rock fragments to seek gold from bits of waste rock at the Barrick mine. Hundreds of local men and women invade the mine every day, seeking pieces of waste rock that might contain gold. Barrick is investigating allegations that about 10 women who trespassed on the mine were sexually assaulted by about a dozen Barrick security guards and Tanzanian police.

Geoffrey York/Globe and Mail)Hide captionAt the Barrick gold mine at North Mara, Tanzania, a woman pours mercury into her palm. She mixes the mercury with water and rock fragments to seek gold from bits of waste rock at the Barrick mine. Hundreds of local men and women invade the mine every day, seeking pieces of waste rock that might contain gold. Barrick is investigating allegations that about 10 women who trespassed on the mine were sexually assaulted by about a dozen Barrick security guards and Tanzanian police.

KINROSS

Kinross Gold Corporation (TSX: K, NYSE: KGC) is a Canadian gold mining company. It is the seventh largest primary gold producer in the world. FULL ARTICLE

KINROSS:

Our values shape our culture, inform how we work, and guide us in managing the opportunities and responsibilities that come with being a global mining company in the 21st century.Our Four Values

Putting People First:health and safety are our number one priority.We treat each other with fairness and respect, and seek constantly to provide opportunities for professional development and personal growth.We foster a working environment that celebr:ates and supports diversity.We recognize that as a global company we must remain sensitive to local cultures, customs and practices.We regard communication as a top priority, and work diligently to ensure that all of our people are kept informed of important company developments and issues.

High Performance Culture: We are a results-oriented company, with a relentless focus on the delivery and execution of high business objectives.We value innovation, adaptability and accountability in executing against our business strategy.We want our people to be known across the industry for their passion, sense of urgency, ability and initiative.Teamwork is essential to what it means to work at Kinross.Continuous improvement is central to our business culture.We recognize and reward excellence.

Rigorous Financial Discipline:We will at all times be prudent with shareholders' money.Discipline is central to our management philosophy.

We will always seek new, more efficient ways to use the company's resources.

Chapter - V

ANALYSIS

5.1. DETERMINATION OF PRICE VOLATILITY OF THE GOLD

PRICE IN FUTURE CONTRACT:

To find the price movement fluctuation and volatility of the Gold

price, six month future contract of Gold is taken and their respective price

is used for the purpose of analsis. The six month period starts from January

2008 future contract to June 2008 future contract.

Line graph shows movements of the future prices of Gold. The X-

axis represents the period of the future contract and , the Y-axis represents

the price of the commodity(Gold100MUM).

For each months contract, descriptive statistics is calculated, this

descriptive statistics shows the Mean, Median, Standard Deviation (S.D),

and Skewness. I have also showed the maximum price movement and the

minimum price movement in the descriptive statistics.

Standard Deviation(volatility):

A statistical term that provides a good indication of volatility. It

measures how widely values (closing prices for instance) are dispersed

from the average. The larger the difference between the closing prices and

the average prices, the higher the standard deviation will be and the higher

the volatility. The closer the closing prices are to the average price, the

lower the standard deviation and the lower the volatility.

A complementary description of the data includes skewness and kurtosis.

Skewness:

Skewness is a measure of symmetry. A data set, or distribution, is

symmetric if it has a similar shape to the left and right of a centre point.

The skewness of a normal distribution is zero. Negative values for the

skewness indicate that observations are skewed leftwards, or that the left

tail is heavier than the right tail. Positive skewness, on the other hand,

indicates more upward spikes (episodes of rising prices) than negative ones.

January – 2008 Futures Contract.

10.10.2007 to 18.01.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

9200

9600

10000

10400

10800

11200

2007:10 2007:11 2007:12 2008:01

SER01

Descriptive statistics

Mean 10225.26

Median 10231.00

Maximum 10936.00

Minimum 9457.000

Std. Dev. 273.5012

Skewness -0.587398

Sum 746444.0

Sum Sq. 5385810

Dev. . Observations

73

February - 2008 Futures Contract

10.11.2007 to 20.02.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

10000

10400

10800

11200

11600

12000

2007:11 2007:12 2008:01 2008:02

SER02

Descriptive statistics

Mean 10732.10

Median 10503.0

0 Maximum 11705.0

0 Minimum 10150.0

0 Std. Dev. 489.243

4 Skewness 0.62596

4 Sum 783443.

0 Sum Sq. Dev.

17233852

Observations

73

March – 2008 Futures Contract

10.12.2007 to 20.03.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

10000

10500

11000

11500

12000

12500

13000

2007:12 2008:01 2008:02 2008:03

SER04

Descriptive statistics

Mean 11306.68

Median 11425.50

Maximum 12795.00

Minimum 10292.00

Std. Dev. 692.6219

Skewness -0.003292

Sum 836694.0

Sum Sq. Dev.

35019932

Observations

74

April – 2008 Futures Contract

10.01.2008 to 17.04.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

10800

11200

11600

12000

12400

12800

13200

2008:01 2008:02 2008:03 2008:04

SER01

Descriptive statistics

Mean 11949.56

Median 11750.00

Maximum 13134.00

Minimum 11040.00

Std. Dev. 550.4586

Skewness 0.449618

Sum 848419.0

Sum Sq. Dev.

21210327

Observations

71

May – 2008 Futures Contract

11.02.2008 to 20.05.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

11200

11600

12000

12400

12800

13200

13600

2008:02 2008:03 2008:04 2008:05

SER01

Descriptive statistics

Mean 12073.86

Median 11990.50

Maximum 13260.00

Minimum 11231.00

Std. Dev. 481.3139

Skewness 0.555413

Sum 869318.0

Sum Sq. Dev.

16448075

Observations

72

June – 2008 Futures Contract

10.03.2008 to 20.06.2008 future price movement

COMMODITY: GOLD 100 GRAMS (GOLD100MUM)

11000

11500

12000

12500

13000

13500

14000

2008:03 2008:04 2008:05 2008:06

SER01

Descriptive statistics

Mean 12192.63

Median 12092.00

Maximum 13697.00

Minimum 11317.00

Std. Dev. 512.2186

Skewness 0.854451

Sum 914447.0

Sum Sq. Dev.

19415222

Observations

75

Chapter - IV

OBSERVATION

6.1. REASONS FOR RISE IN GOLD PRICE

The gold price closed at $825.50. on January 21, 1980, but today, it

takes $2,200.00 to buy what $825.50 bought in January 1980. The reason

for the rise in the gold price are given below;

The Dollar Slide

Over the past five years, the dollar has lost 50% of its value versus

the euro. Large institutions and central banks are moving their dollar-based

assets into non-dollar-based assets. This is coming at a time when the U.S.

economy is slowing to a crawl. In order to stop the U.S. economy from

slipping into a recession, the Federal Reserve has no choice but to reduce

interest rates in order to stimulate the economy. As rates decrease, the

dollar collapses. As the dollar falls, investors are moving their dollar-based

assets into assets such as gold – increasing demand and pushing the price

even higher.

Flight to Quality

The sub-prime mortgage crisis was the means that pushed gold to

28-year highs, and now we’re seeing investors make a flight to quality as

fundamentals are supporting strong prices. In 2007, gold produced a return

just below 30% while the S&P 500 increased less than 8%. The uncertainty

in the U.S. stock market, stemming from the sub-prime crisis, has caused

investors to move their assets into stable assets. These assets, such as gold,

have provided portfolios with much needed protection and, at the same

time, have increased the value of portfolios at a rate of 4 to 1 over the stock

market during the past few years.

Oil Versus Gold Ratio

Historically, the average oil/gold ratio has been around 15:1,

meaning that the price of fifteen barrels of oils equals the price of one

ounce of gold. That ratio has recently dropped to around 9:1. To return to

average levels, the price of gold would have to increase to around $1400.In

the near future, $1400 gold is more likely than $50 per barrel oil.

Central Bank Sales and Purchases

Central bank sales which served to depress the price of gold

throughout the 90s have come to a screeching halt, with most central banks

having already liquidated their gold reserves to a bare minimum. Instead of

selling, central banks are becoming buyers. For instance, China’s gold

reserves account for only one percent of its total reserves. With those

reserves piling up rapidly, it seems inevitable that China will diversify part

of its foreign exchange reserves into gold.

Investment Demand

In recent years, there has been a tremendous increase in institutional

demand for gold. In addition, although investment demand has been

relatively muted in the U.S., there is plenty of demand from the flourishing

middle classes in China and India and from central banks in countries that

have enjoyed gains from foreign trade, such as Russia, the Persian Gulf oil

producing states, and China.

Commodities Super-Cycle

We concur with the strategists at Citigroup, Deutsche Bank and

Goldman Sachs who are among the new generation of “super-cycle”

proponents who believe that supply shortages in growing economies in

China and India will send commodity prices and gold higher for another 15

to 20 years. The forces that have driven commodity prices higher in the

past couple of years remain largely in place: global economic growth is

strong; liquidity is plentiful and is increasing; and the demand for

commodities will continue to grow in emerging Asia as the region

industrializes and wealth grows.

Gold Mania

Mine production is falling at the same time that demand is rising.

Worldwide investment demand for gold will remain at historically high

levels, significantly exceeding 40 million ounces. Don’t rule out the

possibility of a full-blooded mania in gold within the next couple of years,

particularly given the fact that the flight from the dollar is picking up speed

and momentum.

THE POSSIBLE EVENTS THAT COULD DRIVE DOWN THE GOLD PRICE SEEM HIGHLY UNLIKELY.

India could slow its consumption

The U.S stock market could boom, taking the attention away from gold

Peace could break out in the world

There could be a huge gold discovery

Oil prices could collapse

The dollar could rise

FEW GOLD COMPANIES IN INDIA:

ALUKKAS JEWELLERY PONNUS JEWELLERY

D’DAMAS JEWELLERY JOSCO JEWELERS

KALYAN JEWELLERS AGNI GOLD JEWELS

MANAPURAM GOLD

ANGLO GOLD SWARG GOLDS

OCEANA GOLD

BHIMA JEWELS

NAKSHATRA DIAMOND JEWELLERY

ART DECO JEWELERY

Chapter - VII

CONCLUSION

CONCLUSION

The study reveals the importance of the futures contract and tells

how the futures contract is used as a hedging tool in the commodity

exchange market. How the commodities are traded in the commodity

market. Since the study was with special reference to Gold, the volatility of

the Gold future price has been derived and it shows that the price is highly

volatile. Investing in the Gold is more profitable and less risky since, Gold

price is expected to increase further in the long run. Today, gold prices float

freely in accordance with supply and demand, responding quickly to

political and economic events. These findings are of considerable

importance for gold investors and traders.

BIBLIOGRAPHY

BOOKS & MAGAZINES

COMMODITY MARKET AN INTRODUCTION BY JANARDHANAN

BUSINESS WORLD MAGAZINE (16 JUNE 2008)

COMMODITY MARKET MAGAZINE (JUNE 2008)

CORPORATE INDIA MAGAZINE ( 15 JUNE 2008)

HINDU NEWS PAPER

ECONOMICS TIME

WEBSITES:

www.gold.org

www.investopedia.com

www.wikipedia.com