A Presentation on Gold Gold 1
About Club Kautilya Gold 2
Index Introduction 4 Why to Invest in Gold 5 Factors Influencing the Market 7 Why Gold is a Safe Heaven 9 Investment Vehicle NSEL E-Gold 10 12 Gold 3
Introduction Gold is the most popular as an Investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social or currency-based crises. These crises include investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest. Gold 4
Why To Invest In Gold Asset Class Return Potential Liquidity Diversification Benefit Risk Involved Holding Cost Gold & Silver Medium High Very High Low Low Private Equity VC Very High Low Moderate Very High High Hedge Funds Various Low Various Various High Commodities Volatile High High High Low Gold 5
Why To Invest In Gold Gold improves the stability and predictability of portfolio returns. It is not correlated with other assets because the gold price is not necessarily driven by the same factors that drive the performance of other assets. Adding gold to a portfolio introduces an entirely different class of asset. Gold is unusual because it is both a commodity and a monetary asset. Gold is one of the few financial assets that is not linked to a liability. It can provide 'insurance' against extreme movements on the value of traditional asset classes. Gold 6
Factors Influencing the Market Above ground supply of gold from central bank's sale, reclaimed scrap, and official gold loans. Hedging interest of producers/miners. World macroeconomic factors such as the US Dollar and interest rate, and economic events. Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring, all affect metal prices. In India, gold demand is also determined to a large extent by its price level and volatility. Gold 7
With the increase in price of gold and the world wide economic slowdown, investment in gold has increased, as investor seeks safe-haven investments. Gold 8
Why Gold is a Safe Haven 100.0 80.0 60.0 % Change 40.0 20.0 0.0-20.0-40.0-60.0 Y04 Y05 Y06 Y07 Y08 Y09 Y10 Year Gold Silver BSE DJIA FTSE NIKKEI Gold 9
Investment Vehicles Jewellers: All jewellers sell gold coins, gold biscuits and 24 karat gold rings. 24 karat gold rings are the most popular sellers. You can visit your trusted jeweller to purchase gold. You can resell a piece of 24 karat gold without any loss in value. It is important that you check that the gold coin / bar / ring etc has a 24 karat seal on it. The cases of fraud amongst jewellers are common; hence it is best to buy gold only from jewellers that you trust and that have a good reputation. It is a good idea to verify the purity of gold from another jeweller. Bars & Coins: Buying gold bars & coins is a popular way of holding gold. The most traditional way of investing in gold is by buying bullion gold bars & coins. Exchange Traded Funds: Gold exchange-traded funds are traded like shares on the major stock exchanges. Gold ETFs represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. Typically a small commission is charged for trading in gold ETFs and a small annual storage fee is charged. Derivatives: Derivatives, such as gold forwards, futures and options, currently trade on various exchanges around the world and over-the-counter (OTC) directly in the private market. In India, gold futures are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX). Option trading is not started in India. Gold 10
Investment Vehicles Banks: Banks too sell gold. A bank is probably the most trusted source to buy gold. Since people trust their money to banks, buying gold from a bank is a viable idea. One can be sure of the purity of gold. Banks give certificates of purity for the gold coins they sell. However, getting your gold from banks will be costlier as they charge a premium of 10 percent to 15 percent over the market rate. Also note that banks are not permitted to buy back the gold they sell. So, you will have to find another buyer for it. Post offices: An extremely reliable source plus reasonable prices- Indian Postal Offices sell gold coins. Post offices of only a few cities extend this facility. However, this avenue has the potential of reaching out to remote areas. This is because, every village, however, small it may be, has a post office. It can be a very good alternative to local jewellers. Gold coins in lower denominations (0.5 grams, 1.0 grams, 5.0 grams and 8.0 grams) are also sold here so that most people can afford purchasing gold from post offices. Gold 11
NSEL (E-Gold) E-Gold enables investors to invest their funds into gold in smaller denomination and hold it in Demat form. It provided a unique opportunity to buy, accumulate, hold and liquidate "Electronic Gold (E-Gold)" as well as to convert the same into physical gold coin/ bar in a seamless manner. Advantage of E-Gold Holding high purity Gold in Demat form Retail investor can diversify their portfolio No risk of theft/safe custody Hassle free and low cost transaction Liquidity: any time buying and selling at lowest impact cost Gold 12
Thank You For more information or queries - CLUB KAUTILYA Corporate Office: 2 nd Floor, 15, Ashutosh Mukherjee Road, Kolkata 700 020 Secretary Club Kautilya Direct: +91 33 7105 1000 Email: secretary.ck@microsec.in For more details: SMS <CK> space <Name> to 56070 www.ck.microsec.in www.prpsolutions.com Gold 13