GOLD VS SILVER INVESTMENT- INVESTOR's BEHAVIOR AMONG CONSUMERS IN COIMBATORE CITY M. KIRTHIKA

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1 GOLD VS SILVER INVESTMENT- INVESTOR's BEHAVIOR AMONG CONSUMERS IN COIMBATORE CITY M. KIRTHIKA Assistant Professor, Department of Business Administration (IB), PSGR Krishnammal College for Women, Coimbatore ABSTRACT The Main objectives of investment are Safety, Income and Growth of Capital. The mainstream financial media touts a variety of 'anti-inflation' investments that can be used to protect wealth against the ravages of inflation. While such investments may appear to be inflation-proof on paper, none of these investment vehicles have the solid intrinsic value of Gold, silver or any of the other precious metals. Gold and silver are some of the few products with intrinsic value, which would also include necessities of life such as food and shelter. Hence the study has been made to evaluate the importance, need, performance and the extent of awareness on various forms of Gold and Silver metals among the Indian Consumers with special reference to Coimbatore city. The study reveals the mindset of consumers in purchasing and investing in these metals that has played an important role finding a secured place as safe haven future investments irrespective of the price fluctuation prevailing in the commodities market. Keywords: Investment behavior, Gold, Silver, Safe Investments, Income Growth. 1. INTRODUCTION Investments are nothing but, an asset or an item that is purchased with the hope that it will generate income or appreciate in the future. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. 1.1 GOLD AND SILVER Investing in gold has been seen as the supreme way of safe haven investment. Gold investment is booming in recent years and the reason behind this incident can be described as the investor become more aware of the benefit of the gold and its special features. Investment demand for gold has shown a significant increase in the last seven years; as investor seeking the fashion to balance their investment portfolio and safeguard against the economy and political uncertainty. Generally gold demand can be divided into three main types namely Jewellery demand, gold investment demand, and industrial demand. The gold investment can be further divided into physically and non-physically holding the gold. Silver is one of the most precious metals, valued both as a form of currency and store of value. The major components of silver demand are Industrial use (54%), Photography (15%), Jewellery and Silverware (26%) and Coins (5%). Twenty countries together produce 96% of the silver mined globally. Throughout history, Gold and Silver has played closely related roles as precious metals and are usually considered as substitutes to reduce similar types of risks in portfolios. Hence, it is argued that similar economic fundamentals affect the demand for these commodities and a rational long-run interdependency exists between the prices of gold and silver admin@icmrr.org

2 1.2 OBJECTIVE OF THE STUDY The objective of the study is: To study the investor's behavior towards Gold and Silver investments, its performance in investors' portfolio and the extent of awareness among these metals. 1.3 SCOPE OF THE STUDY Gold and silver investments have increased dramatically in the past couple of years and Silver is rising in competition with gold investment. The study has been conducted in order to find out why there is a high demand and why Indian Consumers go in for these kinds of investments. This study also examines the future prospects of these investment portfolios and further study can be done in this area on the understanding of these two commodities that have different economic uses based on the view that they are affected by different economic fundamentals. 1.4 LIMITATIONS OF THE STUDY The findings and observation are based on the respondent's answer which may be affected by the personal bias. The study is limited to only Coimbatore city. The study was conducted for a period of six months. The number of respondents included in the survey is limited to REVIEW OF LITERATURE Manish Mittal and Vyas (2008) have stated that "Investors have certain cognitive and emotional weaknesses which come in the way of their investment decisions. Over the past few years, behavioral finance researchers have scientifically shown that investors do not always act rationally. They have behavioral biases that lead to systematic errors in the way they process information for investment decision. Many researchers have tried to classify the investors on the basis of their relative risk taking capacity and the type of investment they make. Empirical evidence also suggests that factors such as age, income, education and marital status affect an individual's investment decision." Manu Sharma, Payal Dey, and Gunwant Singh Saini (2014), researched on the title "Silver and Global equity Markets" to analyze the trend of returns generated by gold. This trend was then compared with that of the S&P 500 and Dow Jones Precious metal index which included Gold, Silver and Platinum and their performances was evaluated thereafter. The results implied that gold has performed better than the Dow Jones precious metal index and S&P 500 over the past ten years. Sunaina Kanojia and Silky Jain (2014), made a study on "Investment in Gold: Trends and Analysis of Indian Stock Market". This paper has attempted to examine the concept of gold trading in India, to highlight the significance of gold trading in the context of Indian stock market and to analyze the trend of nominal gold prices in Indian stock market. Further it has examined the performance of gold and nifty after adjustment for inflation and to check whether the inclusion of gold in an optimal portfolio improves its performance or not found that inflation adjusted performance of gold is better than the inflation adjusted performance of nifty. In addition, it also proved that inclusion of gold in optimal portfolio has improved the performance admin@icmrr.org

3 3. RESEARCH METHODOLOGY Research methodology is the scientific and systematic research for pertinent information on the specific topic. It includes testing, verification, classification, organization and orientation which include prediction and application. The following are the various components that constitute the research methodology: 3.1. TYPE OF THE RESEARCH The type of research used in the study is descriptive and includes surveys, facts, findings and enquiries of different kinds. The major purpose of the descriptive research is to analyze the detail state affairs as it exists at present 3.2. NATURE OF THE STUDY The study is based on Primary and Secondary Data. Primary data was collected through questionnaire and Secondary data was collected using various journals, websites such as World Gold Council, The Silver Market, Indian Journal of economics, Business and Economic Research etc SAMPLE SIZE A sample is a part of population, which is selected for obtaining the necessary information. A sample size of 102 was selected and collected among the general public 3.4. SAMPLE DESIGN The sample design used was Convenience Sampling Technique TOOLS USED FOR THE STUDY The following tools were used for the study: Simple Percentage Method = Simple percentage method is calculated by dividing the given number of respondents with the total number of respondents multiplied by 100. Chi-Square Test = Chi-square test is one of the simplest and most widely used non-parametric tests in statically work. It is a method to test the relationship between the theoretical (hypothesis) and the observed value. Chi-square = (Oij-Eij) 2 /Eij. Garret Ranking Method = Garret ranking technique has been used to rank the various factors. Garret Ranking =100(Rij-0.5)/Nij Weighted Mean Score = The mean is arithmetic average of set of given numbers. The mean is calculated by adding up the score values and dividing the same with total number of respondents. 4. ANALYSIS AND INTERPRETATION Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting conclusions, and support decision making. Interpretation is essential to find out the usefulness and utility of research findings. It is considered to be the base component of research process. The collected data were tabulated and analyzed using various tools used for the study that includes tables and charts which represents the data admin@icmrr.org

4 4.1. Analysis on Respondents Personal Profile Chart Gender Chart Monthly Income > % Female 60% Male 40% % % <10,000 27% From the above charts it is interpreted that 40% of respondents are male and 60% of respondents are female. It is also interpreted that 27% of respondents were under the income group of less than RS. 10,000; 35% of respondents were earning between RS ; 23% were between RS ; and 15% of respondents were earning monthly income above RS Analysis of Respondents Influence on Gold and Silver Chart Reason for Purchase of Gold and Silver TRADITIO N 42% EXCESSIVE DEMAND 18% HIGH LIQUIDITY 28% CURRENC Y 12% Chart Are they found as Safe Investment From the above chart it is interpreted that 42% of respondent purchase gold and silver out of tradition, 25% purchase because of high liquidity, 18% because of its excessive demand and 12% due to currency value and also 96% of respondents consider these metals as safe investments. NO 4% YES 96% 61 admin@icmrr.org

5 4.3 Analysis on Influential Factors of Gold and Silver Table showing the Factors influenced to Invest in Gold FACTORS INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW STRONGLY AGREE AGREE NEUTRAL DISAGREE STRONGLY AGREE TOTAL SCORE VALUE (TSV) MEAN SCORE VALUE (MSV) Income Excessive Demand Depicts Family Status Gold Investment is Popular Specialist Opinion The above table shows that majority (4) of the respondents are influenced by excessive demand, then the income (4.3) followed by the family status (3.9), gold investment being popular (3.7) and lastly few say they get influenced by some (3.2) specialist opinion Table showing the Investment Pattern on Gold Purchases PARTICULARS RESPONDENTS PERCENTAGE (%) Regular Purchase (Set Aside An Amount For Gold Investment) Short Term Investor (Purchases When Need Arises) Speculator (Often Buys And Sells According To Market) Occasional Buyer (Rarely) Total From the above table it is interpreted that majority of respondents (36%) are short term investors who purchases only when the need arises. The next type of investor around 29% can be seen as the regular purchaser who set aside an amount for gold saving alone, occasional buyers of 21%, who rarely invest in gold and only 14% of respondents are speculators who often buys gold and sells accordingly to the market prices in future Table showing Investment Percentage on Various Silver Types PARTICULARS RESPONDENTS PERCENTAGE (%) Silver Jewellery Silver Bars Silver Coins Silver Scrapes 4 4 Total admin@icmrr.org

6 From the above table it is interpreted that majority of respondents (34%) invest in silver coins, 32% of them in forms of jewellery, 29% in silver bars, and only 4% invest in silver wastages Table showing Factors Influencing Silver Purchases PARTICULARS RESPONDENTS PERCENTAGE (%) Silver a considerable range of gold The value for gold is high Silver utensils and silver product go for high utilization Total From the above table it is interpreted that 35% of respondents purchase silver as it of high utilization, 17% of respondents consider it equivalent to gold and 16% of them for substitute to gold because of being priced. 4.4 Analysis on Awareness towards other Forms of Gold and Silver Metals Table Showing Awareness on other Forms of Gold PARTICULARS RESPONDENTS PERCENTAGE (%) Gold Stock Gold Accounts Gold Exchange Traded Funds Bullions And Bars Total From the above table it is interpreted that 38% of respondents are aware of Gold Accounts, 27% of respondents are aware of Gold Stocks, 23% of respondents are aware of Gold Bullions and Bars and 12% of respondents are aware of Gold Exchange Traded Funds Table Showing Awareness on other Forms of Silver PARTICULARS RESPONDENTS PERCENTAGE (%) Investment In Silver Mining Silver certificate Silver Exchange Traded Fund Silver Derivatives 6 6 Silver Accounts None Total From the above table it is interpreted that the majority of the respondents (25%) are aware of the Silver Exchange Traded Funds, 20% are aware of investments in Silver Mining, 13% are aware of 63 admin@icmrr.org

7 Silver Certificate, 12 % of Silver Accounts and only 6 % are aware of Silver Derivatives. Other 24% of the respondents are unaware of all of the above mentioned forms of Silver Metals. 4.5 Analysis of Relationship between Gender Group and Their Percentage of Investment in Gold and Silver Level of significance is =5% Investment Less than 25-50% 50-75% Above 75% Total Gender 20% Male Female Total DEGREE OF FREEDOM = (R-1) (C-1) = (2-1) (4-1) = 1*3 = 3 Factor Gender Group And Their Investment Percentage In Gold Degree Of Freedom Level Of Significance Calculated Value Table Value Result 3 5% Significant From the above table it shows that at 5% level of significance with the degree of freedom as 3, the calculated value is more than the Table value ( > 7.815), therefore the null hypothesis is not accepted. Hence there is a significant relationship between gender group and their investment percentage in Gold. 4.6 Analysis of Relationship between Monthly Income and Their Percentage of Investment in Gold and Silver Level of significance is =5% Investment <25% 25-50% 50-75% Above 75% Total Monthly income <10, > Total DEGREE OF FREEDOM = (R-1) (C-1) = (4-1) (4-1) = 3*3 = admin@icmrr.org

8 Factor Monthly Income And Percentage Of Investment Degree Of Freedom Level Of Significance Calculated Value Table Value Result 9 5% Significant The above table shows that at 5% level of significance with the degree of freedom as 9 the calculated value is more than the Table value ( > ), therefore the null hypothesis is not accepted. Thus there is a significant relationship between monthly income and percentage investment in Gold. 4.7 Garret Ranking Analysis on Investment Choice among Various Investment Avenues DETAILS TOTAL GARRET AVERAGE SCORE SCORE RANK Gold I Silver IV Stocks III Bonds VI Fixed II Deposit Real Estate V The above table highlights the Garret ranking scores and the average scores. The average scores are ranked according to their values. The first rank has been assigned to Gold, the second rank to Fixed deposit, the third rank to Stocks, the fourth rank to Silver, fifth rank to Real Estate and sixth rank to Bonds. Hence it is interpreted that Respondents mostly invest in gold than the other investment avenues. Few rarely invest in bonds. It is clear that Gold investments are comparatively higher to Silver that ranks 4th and other available avenues. 4.8 Analysis of Gold and Silver Demand Chart Demand for Gold Chart Demand on Silver NO 27% NO 30% YES 73% YES 70% 65 admin@icmrr.org

9 The above charts show that the demand for Gold is always high and stable (73%), even though there is volatility in gold prices year by year with changing economic conditions. About 70% of respondents have stated that the demand for Silver is increasingly higher in the recent past years comparative to Gold. 5. FINDINGS The findings of the study show that; About 60% of the respondents are female. 35% of the respondent s monthly income is between Rs. 10,001-25,000 that clearly states that they comprise Middle Income Group. According to data, 42% of respondents state that the Gold and Silver are bought and considered as a family tradition and need from the Indian context. 96% respondents invest in gold and silver metals for the concern of safety investments. Mostly 36% of respondents agreed that they see themselves as short term investors and are influenced to purchase Gold and Silver metals due its excessive demand (4.3) in the market. 34% of respondents invest in silver coins and 35% of respondents are influenced to this investment as they find there is high utilization for silver utensils and products. 38% of respondents are aware of Gold accounts used as an another source of Gold investment 25% of respondents are aware that Silver Exchange Traded funds are used as another source of Silver investment. At 5% significance level, it shows that there is significant relationship between Gender and their investment percentage in Gold with a table value of at 3 degree of freedom. At 5% significance level, it shows that there is significant relationship between monthly income and their investment percentage in Gold with a table value of at 9 degree of freedom. Gold ranks first among investors across other saving investments avenues with Silver ranking fourth. Around 70% of respondents stated that demand for Gold and Silver investments are high irrespective of changing rates in the world global market. 6. SUGGESTION The following are the suggestions made based on the study. Growing income leads to safest means of investment in the field of gold and silver. This leads to savings for future. Gold are purchased on needs and sold according to the current market value. Individual income affects more in this sector, without which income savings cannot be done With steady increase in demand for gold and silver, people find these investments as safe and secured. As people tend to purchase gold due to family status and tradition that prevail in Indian culture, efforts can be taken to create an awareness regarding other investments options like E-gold and Gold ETF s. Since there is high demand for gold due to symbol of social prestige s, desire and wants of different people, half of individual s income can be set aside as safe havens for future admin@icmrr.org

10 7. CONCLUSION From the study it can be concluded that for average Indian, public money is everything. So they are very sensitive about their money. They will think hundred times before investing in any market and will expect more than that. This can be achieved by investing in gold and silver. The response of gold and silver reveals as to how these metals serves as a saving instrument in the Indian context. Statistical findings indicate that the frequently cited long-term stable relationship between the prices of gold and silver has disappeared. It is indicated that these two markets should be approached as separate markets and changes in gold to silver ratios should not be used to predict prices in the future and it is also implied that these two markets should not be regarded as substitutes to hedge against similar types of risks. This view is consistent with the understanding that these two commodities have different economic uses and they are affected by different economic fundamentals. BIBLIOGRAPHY REFERENCES Manu Sharma, Payal Dey, and Gunwant Singh Saini (2014), Silver and Global Equity Markets, The Journal of Private Equity, Spring 2014, Vol.17, No.2, pp: Sunaina Kanojia and Silky Jain (February, 2014), Investment in Gold: Trends and Analysis of Indian Stock Market. Investment in Gold: Trend and Analysis of Indian Stock Market, Conference proceedings of IMRC organized by ADMI, Mumbai University, India. BOOKS Khan & Jain, (2005), Financial Management, 3rd edition, Tata McGraw- Hill Publishing. Donald E Fischer, Ronald J Jordan., (1995), Security Analysis and Portfolio Management,Prentice Hall. World Gold Council, An effective hedge in Gold in the Official Sector, No. 18, January2002. WEBSITES Business Standard: Gold demand in India to rise 33% by 2020: WGC BS Reporter / Bangalore April 1, 2011, 1:23 IST-http: //business standard.com Philip Klapwij, GFMS Ltd, May 2008, World Silver Survey 2008, The Silver InstitutePresentation, ntation.pdf. Last accessed on June 18, market.com 67 admin@icmrr.org