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A report On ANALYSING FUTURE TRENDS OF THE COMMODITY MARKET

BY SACHIN JAIN 12BSP1061


(UNICON INVESTMENT SOLUTIONS)

A report On

ANALYSING FUTURE TRENDS OF THE COMMODITY MARKET BY SACHIN JAIN (12BSP1061) (UNICON INVESTMENT SOLUTIONS)

A REPORT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF PGPM PROGRAM OF IBS GURGAON 5 June,2013

Acknowledgement
The successful completion of this project marks the beginning of a learning experience of converting ideas and concepts into real life practical implication. The project has been a platform in my learning and acquiring knowledge about the financial sector so as to help me in my future endeavors. The experience gained during the project period had been very useful in the conversion of theoretical knowledge gained in the course to be put into live situation. It would be worthy while to mention the contributions made by people around me leading to the completion of this project and all that I learnt.

First & foremost I would like to thank Mr.Gagender Nagpal (Chief Executive Officer, Unicon Investment Solutions) for giving me an opportunity to work as a management trainee in Unicon Investment Solutions.

I would also like to thank Mr. Gaurav Jain (Assistance Vice-President, Unicon Investment Solutions and my internal guide) for giving me guidance and training in understanding the commodity market and helping me to complete my project successfully. His cooperation made me worthy of being able to pursue such a challenging project and complete it successfully.

I would also want to thank to my mentor Mrs. Prapti Paul for guiding and supporting me during my training period .Her support made me feel comfortable in completing my project in the company successfully.

I would also want to thank to Mr.Rahul Gupta for making me comfortable with the analysis part, and helped me in understanding the technical analysis of market. His invaluable guidance and thoughtful consideration had been the key motivating factor throughout my project, which enabled me to complete my project so efficiently and effectively

Contents Acknowledgement .......................................................................................................................... 3 ABSTRACT.................................................................................................................................... 6 INTRODUCTION OF THE COMPANY ...................................................................................... 8 Introduction of the organization .............................................................................................. 8 Aim and establishment of the company .................................................................................. 8 MISSION: ................................................................................................................................ 9 VISION:................................................................................................................................... 9 Departments of the company ................................................................................................... 9 Key product offerings of UNICON are as follows: .................................................................... 9 Equity....................................................................................................................................... 9 Commodity ............................................................................................................................ 10 Depository ............................................................................................................................. 10 Facilities Offered by Unicon ......................................................................................................... 11 INTRODUCTION OF THE PROJECT........................................................................................ 19 Technical Analysis:- .............................................................................................................. 19 The Basis of Technical Analysis ........................................................................................... 19 General Steps to Technical Evaluation ......................................................................................... 21 Chart Analysis ....................................................................................................................... 21 Top-Down Technical Analysis .............................................................................................. 22 Strengths of Technical Analysis ................................................................................................... 22 Focus on Price ....................................................................................................................... 22 Supply, Demand, and Price Action ....................................................................................... 22 Support/Resistance........................................................................................................................ 23 Pictorial Price History ................................................................................................................... 24 Assist with Entry Point ................................................................................................................. 24 Weaknesses of Technical Analysis ............................................................................................... 25 Analyst Bias ........................................................................................................................... 25 Open to Interpretation ............................................................................................................ 25 Too Late ................................................................................................................................. 25

Always Another Level ........................................................................................................... 25 Trader's Remorse ................................................................................................................... 25 Fundamental Analysis ................................................................................................................... 26 General Steps to Fundamental Evaluation .................................................................................... 26 Strengths of Fundamental Analysis .............................................................................................. 27 Weaknesses of Fundamental Analysis .......................................................................................... 28 MCX ............................................................................................................................................. 29 BENEFITS OF TRADING ON MCX .......................................................................................... 29 GOLD ........................................................................................................................................... 30 INTRODUCTION ..................................................................................................................... 30 APPLICATION ......................................................................................................................... 30 INDIAN SCENARIO ................................................................................................................ 30 WORLD DEMAND AND SUPPLY ............................................................................................ 31 Demand ......................................................................................................................................... 37 Supply ........................................................................................................................................... 37 Analysis......................................................................................................................................... 40 Technical analysis.................................................................................................................. 40 SILVER......................................................................................................................................... 41 INTRODUCTION ................................................................................................................. 41 APPLICATIONS ................................................................................................................... 41 WORLD DEMAND AND SUPPLY .................................................................................... 42 SILVER HISTORICAL PRICE CHART.............................................................................. 43 SILVER DATA ............................................................................................................................ 45 Analysis......................................................................................................................................... 51 Technical analysis.................................................................................................................. 51 Fundamental analysis ............................................................................................................ 51 Conclusion .................................................................................................................................... 52 REFRENCES ................................................................................................................................ 53

ABSTRACT
India is one of the largest agrarian economies makes it a natural territory for trading in commodities. Agricultures share in Indias GDP stands at 26%, while the commodity sector, including non-agro commodities and bullion-related industries, constitutes about 58% of the countrys GDP.

India is essentially a commodity-based economy and the physical commodity market in India is around Rs.11, 00,000 crore. India also happens to be one of the largest importers of gold (80% of demand of 800 tones) and silver (70% of demand of 3800 tones). Mcx (multi commodity exchange) provides a platform to potential investor to trade in these commodities, so that the investors will make money using the fluctuations in price movements in these commodities.

But how an investor will know when to enter or exit from a particular commodity? Thus it becomes essential to undergo technical and fundamental analysis of the commodities to see where momentum is rising, so that trader can place their trades.

Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements. Technical analysis mainly seeks to predict the short term price travels. The focus of technical analysis is mainly on the internal market data, i.e. prices & volume data. It appeals mainly to short term traders.

On the other hand, fundamental analysis refers to the study of market demand and supply to determine the future directions of price movements. It mainly seeks to determine the long term price travels. The focus of fundamental analysis is mainly on market fundamentals i.e. demand and supply.

The scope of this project report is to undertake Technical and Fundamental analysis of precious metals- Gold and Silver to predict the future trends of these bullion metals.

For this purpose, Gold and Silver prices for the past 45 days i.e. from 15th April 2013 till 31st May 2013 was collected including open price, high price, low price and closing price. Using these prices, candlestick chart has been prepared in MS-EXCEL. While analyzing the chart, it was observed that for short term, both gold and silver tends to be technically weak. The drastic fall in the prices of both the metals on 15th April, 2013, due to aggressive selling is the main reason behind this. Gold, even to some extent has been able to survive and trade within a specified range of 25500-27500 for whole of the period. But in case of silver, the situation is worse. Silver was not able to gain its momentum back after the drastic fall. There is continuously a heavy selling pressure in silver which did not led the prices, even to cross the level of 46200 again. This is a very crucial level for silver, if it crosses this level further buying can be expected till 49000 level. Till then there is only a sell call in both the metals for short term perspective.

But as we know that Gold and Silver has always been used for long term investment by the investors. Gold being mainly used for jewellery and investment purpose, Silver on the other hand is used for industrial and decorative uses, photography and jewellery , and silverware. Thus the extensive demand and scarce nature of both precious metals makes them attractive from investment point of view.

But we should also consider that gold is mainly used for jewellery purpose, about 80% of the gold used is in the form of jewellery, thus the demand and prices of Gold tends to rise only during wedding seasons and some special occasions like Akshaya Tritiya . But, on the other hand, silver has an extensive usage, about 90% of the silver extracted finds its use in industries. This is the reason why silver has always outperformed the Gold in terms of returns. In the past few years , Silver provided an annual return of 14.58% in respone to 12.54% return from Gold.

Thus as per my point of view, the present downtrend in the prices of the metals can be viewed as an attractive entry point for long term investors. Also, as per my analysis, Silver, the white metal would prove to be an attractive investment vehicle for long term as compared to Gold.

INTRODUCTION OF THE COMPANY


Introduction of the organization

UNICON is a financial services company which has emerged as a one-stop investment solutions provider. It is a professionally managed company led by a team with outstanding managerial acumen and cumulative experience of more than 400 man years in the financial markets The Company is supported by more than 2400 Uniconians and has an extensive network of over 323 business offices in 152 cities across India.

Aim and establishment of the company

UNICON was founded in 2004 by two visionary and hard working entrepreneurs, Mr. Gajendra Nagpal and Mr. Ram M. Gupta, who possess expertise in the field of Finance. The company is headquartered in New Delhi, and has its corporate office in Mumbai with regional offices in Kolkata, Chennai, Hyderabad and Noida.

With a customer base of over 200,000 the Unicon Group has an eye for the intricate financial needs of its clients and caters to both their short term and long term financial needs through a comprehensive bouquet of investment services. It has been founded with the aim of providing world class investing experience to the investing community. These services range from offline & online trading in equity, commodities and currency derivatives to debt markets, corporate finance and portfolio management services. The company has a sizable presence in the distribution of 3rd party financial products like mutual funds, insurance products and property broking. It also provides expert Advisory on Life Insurance, General Insurance, Mutual Funds and IPOs. The distribution network is backed by in-house back office support to provide prompt and efficient customer service.

The Equity broking arm UNICON Securities Pvt. Ltd offers personalized premium services on the NSE, BSE & Derivatives market. The Commodity broking arm Unicon Commodities Pvt. Ltd offers services in Commodity trading on NCDEX and MCX. The UNICON group also has a PCG division providing investments solutions for High Net Worth Individuals. The Corporate Advisory Services arm Unicon Capital Services (P) Ltd offers entire gamut of Investment Banking services to corporate.

MISSION: Unicons mission is to protect and promote the wealth of all its stakeholders by providing trustworthy, best in class financial products and services.

VISION:

To be India's financial services company of choice recognized for its reliability, innovation, responsiveness to customers and exemplary citizenship. Departments of the company

Unicon customers have the advantage of trading in all the market segments together in the same window, as we understand the need of transactions to be executed with high speed and reduced time. At the same time, they have the advantage of having all Advisory Services for Life Insurance, General Insurance, Mutual Funds and IPOs also.

Unicon is a customer focused financial services organization providing a range of investment solutions to our customers. We work with clients to meet their overall investment objectives and achieve their financial goals. Our clients have the opportunity to get personalized services depending on their investment profiles. Our personalized approach enables clients to achieve their Total Investment Objectives.

Key product offerings of UNICON are as follows:


Equity

Unicon introduces you to the world of Empowered Investing! Our world-class secure technology offers you the facility of investing in financial markets from the convenience of your home/office, with complete peace of mind. Unicon offers its customers a wide range of financial services including trade execution on BSE, NSE, Derivatives, Depository Services, Expert advice from Unicons in-house research team, Commodity trading etc.

Commodity

When the global scenario of the stock markets are under a great turmoil, than it's the right time that our portfolios should be hedged with Commodities markets. With UNICON you not only get the expertise advice but a Unique Trading Platform, which gives you a Great Trading experience in Commodities market. With a Unicon Trading Account, you can trade in Commodity Futures from both MCX and NCDEX using a single screen.

The Unicon Commodities Advantage:

Live Market Watch for commodity market (NCDEX, MCX) in one screen. Add any number of scripts in the Market Watch. Tick by tick live updating of intraday chart. Common window for market watch and order execution. Key board driven short cuts for punching orders quickly. Real time updating of exposure and portfolio. Facility to customize any number of portfolios & watch lists. Market depth, i.e. Best 5 bids and offers, updated live for all scripts. Facility to cancel all pending orders with a single click. Instant trade confirmations. Stop-loss feature.

Depository

Unicon Depository Services offers Dematerialization services as a participant in Central Depository Services Limited (CDSL), through its Depository operations. The company believes in efficient and cost-effective and integrated service support to its brokerage business. Unicon Securities Private Limited, as a depository participant, will offer depository accounts for

individual investors as well as corporates which will enable them to transact in the Dematerialized segment, without any hassles.

Depository offers a safe, convenient way to hold securities as compared to holding securities in paper form. Our service provides an integrated single platform for all our clients ensuring a risk free, efficient and prompt depository process.

Facilities Offered by Unicon


* De-materialization Clients can submit their physical shares at any of the Unicon branches and convert them in electronic form, commonly known as Dematerialization.

* Re-materialization Clients can also request for Re-materialization which enables them to convert the Dematerialized shares into paper or physical form as per their convenience.

* Transfer Inter and intra depository services are widely available at all of the Unicon branches through which clients can transfer their shares anytime.

* IPO Clients can apply for IPO using their Demat account details and on allotment the securities are transferred directly to their Demat accounts.

* Corporate Actions While holding your stock in Demat account, in case you are eligible for any bonus and rights issues the allotment would be transferred to your Demat account.

* Easi: You can view your Demat account over the Internet and avail a host of services. This facility empowers our clients to view, download, and print updated holdings with respective valuations.

Distribution IPO IPO (Initial Public offering) of shares is made by companies wanting to raise substantial capital from the market. Stay abreast on Upcoming IPOs, Open Issues, IPO News and all that is happening in the IPO market with Unicon. Unicon makes sure that you dont miss any opportunity of subscribing or making a good IPO investment.

Be constantly updated on all the upcoming and current IPO issues and all IPO news Track all the IPO issues through our IPO calendar Follow simple steps of the IPO process for a successful IPO investment Benefit from our in-depth analysis of IPO issues, latest IPO listings Have access to IPO prospectus, offer documents and other IPO research reports

MUTUAL FUNDS Mutual Funds are Flexible, Affordable and a Low Cost Investment Option. Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as capital markets. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Even if you are an investor, who could otherwise not enter stock markets because of low investible funds, you can benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds. At Unicon we choose from Indias Best Mutual Funds to construct your 'Wealth Creation Portfolio'.Connect with us now to find the best Mutual Fund investment opportunities based on your needs.

Properties At Unicon Investment Solutions, we assist our prestigious customers in investing in the best properties in India, by offering them the most lucrative real estate deals. We provide full fledged investment solutions for residential as well as commercial properties in India, which include services related to the purchase of properties, documentation, renting and leasing, investment advisory services, property valuation and assisting clients with the various types of home loans available from banks.

Uniconproperty.com is the online portal for Unicon Investment Solutions' dedicated real estate consultant company, popularly known as Unicon Real Estates Pvt. Ltd. The website clearly lists all major upcoming residential and commercial projects in India, thus making it easy for users to browse properties without having to step out of their homes.

NRI Services Unicon now offers a convenient and hassle-free way of Investing in the Indian Securities Market to NRIs who wish to participate in the Indian Growth story. We at Unicon, guide our NRI clients at every step of their investment needs so that they have complete peace of mind about their investments in India. Our capability to analyze relevant information in market trends, relevant data and the best-in-class investment products plays an important role in assisting our NRI clients in making a right decision. Our rich experience of capital markets & retail financial services makes us a reliable NRI investment solutions company. Our products, services and technology help facilitate an excellent investment experience.

The Investment Opportunity called "India" India's economy is sizzling and is one of the fastest growing in the world. Political stability and broad consensus on reforms Liberal and transparent foreign investment regime. Well developed banking system Vibrant capital market. (National Stock Exchange: third largest, Bombay Stock Exchange: 5th largest in terms of number of trades) Vibrant capital market. (National Stock Exchange: third largest, Bombay Stock Exchange: 5th largest in terms of number of trades) India is rated as the most attractive destination for offshore business processing by global consultancy A T Kearney India amongst the leading entrepreneurial hotbeds globally (Red Herring clubs India with Israel) Indian policies fully compatible with World Trade Organization World bank sees Indias growth positive (Source Hindustan Times) 220 of the fortune 500 companies source software from India

Unicon now offers a convenient and hassle-free way of Investing in the Indian Securities Market to NRIs who wish to participate in the Indian Growth story. We at Unicon, guide our NRI clients at every step of their investment needs so that they have complete peace of mind about their investments in India. Our capability to analyze relevant information in market trends, relevant data and the best-in-class investment products plays an important role in assisting our NRI clients in making a right decision. Our rich experience of capital markets & retail financial services makes us a reliable NRI investment solutions company. Our products, services and technology help facilitate an excellent investment experience

Back Office Unicon through its online back-office aims to increase the transparency and provides you the link to view the details of your account online anytime and anywhere. Here you have the advantage of viewing the following reports online:

Sauda Details Financial Ledger Net position for the day Net position Detail (for the complete financial year) E-Contract Note

Fixed Income The Fixed income vertical of UNICON Group deals in Sovereign Paper and Money Market/Fixed Income Instruments Broadly, it undertakes following:

Dealing in all types of money market instruments viz. Commercial paper (Origination & Placement), Certificate of Deposit and Treasury Bills both in Primary and Secondary market. Dealing in Government securities (including securities of Oil, Fertilizer & Food Bonds) and other PSU/ Corporate bonds with counterparties like Banks, Primary Dealers, Mutual Funds, Insurance Companies, Regional Rural Banks, Cooperative Banks, Central & State PSUs, Housing Finance Companies, NBFCs & Corporates. Retailing of Central, State Government Securities and Bonds to exempted PF Trusts, Charitable & Religious Trusts. Advisory, Training and Consultancy services to Regional Rural Banks, Cooperative Banks & P.F. Trusts.

Investment Banking

Unicon Capital Services (The Investment Banking arm of the Unicon Group) is a SEBI registered Category I merchant banker providing a bouquet of corporate finance advisory and merchant banking services. Our wide experience and market knowledge as a leading securities firm ensures that clients requirements are met at optimum cost. By constantly improving our knowledge capital and remaining focused on client needs, we aim to create significant value for our clients by helping them execute the right capitalization strategy.

Other Service Offerings Valuation Services Capital Restructuring Advisory ESOP Valuation Buybacks Delisting QIPs

Currency Derivatives Currency derivative is a contract between the seller and buyer, whose value is to be derived from the underlying asset, the currency amount. A derivative based on currency exchange rates is a future contract which stipulates the rate at which a given currency can be exchanged for another currency as at a future date.

Benefits of Currency Trading The Currency Derivatives product is a bundle of opportunities for a number of players. It is a new asset class for diversification of investments for all Resident Indians It gives hedging opportunities to:

a) Importers and exporters who can hedge their future payables and receivables b) Borrowers, who can hedge foreign currency (FCY) loans for interest and principal payments c) Resident Indians, who can hedge their offshore investments d) Commodity traders can hedge against unfavourable movements of gold, crude etc.

It gives arbitrage opportunities It gives trading opportunities because of its volatility and multiplicity It provides highly transparent rates to traders as it is exchange-traded Unlike currency forwards offered by banks, currency futures trading does not have to be backed by an underlying merchant transaction exposure Tight bid ask spreads; usually 0.25 paisa wide Margin requirements less than 5% to take exposure on a lot size of Rs.1000, 1000, 1000 and 1,00,000 respectively For exporters and importers, no credit line required from their Banker as is the case with forwards Ideal tool for those with smaller exposures, as in the case of travel needs, educational payments etc.

Add the Unicon Advantage to Forex Trading Facility to our existing offline as well as online customers to trade in Currency derivatives by filling up a simple form. There is no need to open a separate trading account to trade in Currency Derivatives. Your Cash margin with Unicon can be used for both Equity as well as Currency transactions Online & Offline trading facility on all the bourses. Facility to place buy/sell orders through branches, internet and over the phone. Receive education on the product through seminars/con-calls organized by Unicon. Exclusive daily commentary and research reports by a specialized Currency Analyst Team that helps you take informed decisions Regular updates on Dollar INR movement with calls to buy and sell Special consultancy to Exporters, Importers & Corporate for their Forex transactions.

Portfolio Management The capital markets today have not only become far more complex in terms of compliances, methodologies, effects and analysis but also need a constant tracking mechanism. As is the case globally, the Indian investor has also realized the advantages of seeking professional advice in order to not only manage but also augment his/her portfolio professionally and with full insight into the objectives.

The Portfolio Management Schemes of the Company offer Discretionary Schemes (Unicon Optimizer & Unicon Growth) for Individuals, Corporate Bodies, Partnership firms, Proprietors, Non Resident Indians etc. The Company is registered with SEBI enabling it to undertake Portfolio Management activities under a specific license.

INTRODUCTION OF THE PROJECT


Technical Analysis:Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements.

Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply and demand. Price refers to any combination of the open, high, low, or close for a given security over a specific time frame. The time frame can be based on intraday (1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data and last a few hours or many years. In addition, some technical analysts include volume or open interest figures with their study of price action.

The Basis of Technical Analysis At the turn of the century, the Dow Theory laid the foundations for what was later to become modern technical analysis. Dow Theory was not presented as one complete amalgamation, but rather pieced together from the writings of Charles Dow over several years. Of the many theorems put forth by Dow, three stand out: Price Discounts Everything Price Movements Are Not Totally Random What Is More Important than Why

Price Discounts Everything

This theorem is similar to the strong and semi-strong forms of market efficiency. Technical analysts believe that the current price fully reflects all information. Because all information is already reflected in the price, it represents the fair value, and should form the basis for analysis. After all, the market price reflects the sum knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side analysts, market strategist, technical analysts, fundamental analysts and many others. It would be folly to disagree with the price set by such an impressive array of people with impeccable credentials. Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.

Prices Movements are not Totally Random Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis. A technician believes that it is possible to identify a trend, invest or trade based on the trend and make money as the trend unfolds. Because technical analysis can be applied to many different time frames, it is possible to spot both short-term and long-term trends. "What" is More Important than "Why"

Technicians, as technical analysts are called, are only concerned with two things: 1. 2. What is the current price? What is the history of the price movement?

The price is the end result of the battle between the forces of supply and demand for the company's stock. The objective of analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach. Fundamentalists are concerned with why the price is what it is. For technicians, the why portion of the equation is too broad and many times the fundamental reasons given are highly suspect. Technicians believe it is best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it. Who needs to know why?

General Steps to Technical Evaluation


Chart Analysis Technical analysis can be as complex or as simple as you want it.

Overall Trend: The first step is to identify the overall trend. This can be accomplished with trend lines, moving averages or peak/trough analysis. As long as the price remains above its uptrend line, selected moving averages or previous lows, the trend will be considered bullish. Momentum: Momentum is usually measured with an oscillator such as MACD. If MACD is above its 9-day EMA (exponential moving average) or positive, then momentum will be considered bullish, or at least improving. Buying/Selling Pressure: For stocks and indices with volume figures available, an indicator that uses volume is used to measure buying or selling pressure.

Relative Strength: The price relative is a line formed by dividing the security by a benchmark. For stocks it is usually the price of the stock divided by the S&P 500. The plot of this line over a period of time will tell us if the stock is outperforming (rising) or under performing (falling) the major index.

The final step is to synthesize the above analysis to ascertain the following: Strength of the current trend. Maturity or stage of current trend. Reward to risk ratio of a new position. Potential entry levels for new long position.

Top-Down Technical Analysis For each segment (market, sector and stock), an investor would analyze long-term and short-term charts to find those that meet specific criteria. Analysis will first consider the market in general, perhaps the S&P 500. If the broader market were considered to be in bullish mode, analysis would proceed to a selection of sector charts. Those sectors that show the most promise would be singled out for individual stock analysis.

Strengths of Technical Analysis


Focus on Price If the objective is to predict the future price, then it makes sense to focus on price movements. Price movements usually precede fundamental developments. By focusing on price action, technicians are automatically focusing on the future. The market is thought of as a leading indicator and generally leads the economy by 6 to 9 months. To keep pace with the market, it makes sense to look directly at the price movements. More often than not, change is a subtle beast. Even though the market is prone to sudden knee-jerk reactions, hints usually develop before significant moves.

Supply, Demand, and Price Action Many technicians use the open, high, low and close when analyzing the price action of a security. There is information to be gleaned from each bit of information. Separately, these will not be able to tell much. However, taken together, the open, high, low and close reflect forces of supply and demand. Open - This is the price of the first trade for the period (e.g., the first trade of the day). When analyzing daily data, the Open is especially important as it is the consensus price after all interested parties were able to "sleep on it." High - This is the highest price that the security traded during the period. It is the point at which there were more sellers than buyers (i.e., there are always sellers willing to sell at higher prices, but the High represents the highest price buyers were willing to pay).

Low - This is the lowest price that the security traded during the period. It is the point at which there were more buyers than sellers (i.e., there are always buyers willing to buy at lower prices, but the Low represents the lowest price sellers were willing to accept).

Close - This is the last price that the security traded during the period. Due to its availability, the Close is the most often used price for analysis. The relationship between the Open (the first price) and the Close (the last price) are considered significant by most technicians. This relationship is emphasized in candlestick charts.

Volume - This is the number of shares (or contracts) that were traded during the period. The relationship between prices and volume (e.g., increasing prices accompanied with increasing volume) is important.

Open Interest - This is the total number of outstanding contracts (i.e., those that have not been exercised, closed, or expired) of a future or option.Open interest is often used as an indicator.

Bid - This is the price a market maker is willing to pay for a security (i.e., the price you will receive if you sell). Ask - This is the price a market maker is willing to accept (i.e., the price you Will pay to buy the security.

Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are usually marked by periods of congestion (trading range) where the prices move within a confined range for an extended period, telling us that the forces of supply and demand are deadlocked. When prices move out of the trading range, it signals that either supply or demand has started to get the upper hand. If prices move above the upper band of the trading range, then demand is winning. If prices move below the lower band, then supply is winning.

Support: Areas of congestion or previous lows below the current price mark support levels. A break below support would be considered bearish.

Resistance: Areas of congestion and previous highs above the current price mark the resistance levels. A break above resistance would be considered bullish.

Pictorial Price History


Even if you are a tried and true fundamental analyst, a price chart can offer plenty of valuable information. The price chart is an easy to read historical account of a security's price movement over a period of time. Charts are much easier to read than a table of numbers. On most stock charts, volume bars are displayed at the bottom. With this historical picture, it is easy to identify the following: Reactions prior to and after important events. Past and present volatility. Historical volume or trading levels. Relative strength of a stock versus the overall market.

Assist with Entry Point


Technical analysis can help with timing a proper entry point. Some analysts use fundamental analysis to decide what to buy and technical analysis to decide when to buy. It is no secret that timing can play an important role in performance. Technical analysis can help spot demand (support) and supply (resistance) levels as well as breakouts. Simply waiting for a breakout above resistance or buying near support levels can improve returns.

Weaknesses of Technical Analysis


Analyst Bias Technical analysis is subjective and our personal biases can be reflected in the analysis. It is important to be aware of these biases when analyzing a chart. If the analyst is a perpetual bull, then a bullish bias will overshadow the analysis. On the other hand, if the analyst is a disgruntled eternal bear, then the analysis will probably have a bearish tilt.

Open to Interpretation Furthering the bias argument is the fact that technical analysis is open to interpretation. Even though there are standards, many times two technicians will look at the same chart and paint two different scenarios or see different patterns. Both will be able to come up with logical support and resistance levels as well as key breaks to justify their position. While this can be frustrating, it should be pointed out that technical analysis is more like an art than a science, somewhat like economics. Is the cup half-empty or half-full? It is in the eye of the beholder. Too Late Technical analysis has been criticized for being too late. By the time the trend is identified, a substantial portion of the move has already taken place. After such a large move, the reward to risk ratio is not great. Always Another Level Even after a new trend has been identified, there is always another "important" level close at hand. Technicians have been accused of sitting on the fence and never taking an unqualified stance. Even if they are bullish, there is always some indicator or some level that will qualify their opinion. Trader's Remorse Not all technical signals and patterns work. When you begin to study technical analysis, you will come across an array of patterns and indicators with rules to match. For instance: A sell signal is given when the neckline of a head and shoulders pattern is broken. Even though this is a rule, it is not steadfast and can be subject to other factors such as volume and momentum. In that same vein, what works for one particular stock may not work for another. A 50-day moving average may work great to identify support and resistance for IBM, but a 70-day moving average may work better for Yahoo. Even though many principles of technical analysis are universal, each security will have its own idiosyncrasies.

Fundamental Analysis
Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. It is about using real data to evaluate a securitys value. Fundamental analysis is done by examining related economical, financial and other qualitataive and quantative factors. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. Fundamental analysis attempt to study everything that can effect the securitys value including macroeconomic factors and company specific factors.

General Steps to Fundamental Evaluation


Even though there is no one clear-cut method, a breakdown is presented below in the order an investor might proceed. This method employs a top-down approach that starts with the overall economy and then works down from industry groups to specific companies. Economic Forecast First and foremost in a top-down approach would be an overall evaluation of the general economy. The economy is like the tide and the various industry groups and individual companies are like boats. When the economy expands, most industry groups and companies benefit and grow. When the economy declines, most sectors and companies usually suffer. Many economists link economic expansion and contraction to the level of interest rates. Narrow Within the Group Once the industry group is chosen, an investor would need to narrow the list of companies before proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and the innovators within a group. The first task is to identify the current business and competitive environment within a group as well as the future trends. How do the companies rank according to market share, product position and competitive advantage? Who is the current leader and how will changes within the sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be it marketing, technology, market share or innovation. A comparative analysis of the competition within a sector will help identify those companies with an edge, and those most likely to keep it.

Strengths of Fundamental Analysis


Long-term Trends Fundamental analysis is good for long-term investments based on long-term trends, very longterm. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies. Value Spotting Sound fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think long-term and value. Graham and Dodd, Warren Buffett and John Neff are seen as the champions of value investing. Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power. Business Acumen One of the most obvious, but less tangible, rewards of fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians will agree to that. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. Knowing Who's Who Stocks move as a group. By understanding a company's business, investors can better position themselves to categorize stocks within their relevant industry group. Business can change rapidly and with it the revenue mix of a company. This happened to many of the pure Internet retailers, which were not really Internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can make a huge difference in relative valuations.

Weaknesses of Fundamental Analysis


Time Constraints Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on Wall Street. When this happens, the analyst basically claims that the whole street has got it wrong. This is not to say that there are not misunderstood companies out there, but it is quite brash to imply that the market price, and hence Wall Street, is wrong. Industry/Company Specific Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can get quite time-consuming, which can limit the amount of research that can be performed. Analyst Bias The majority of the information that goes into the analysis comes from the company itself. Companies employ investor relations managers specifically to handle the analyst community and release information. Thus while analysing the information, analysts should be aware of the biasness of the investor relations manager.

MCX
The Multi Commodity Exchange of India Limited (MCX) is a India-based state-of-the-art electronic commodity futures exchange that facilitates online trading, and clearing and settlement of commodity futures transactions, providing a platform for risk management. MCX offers trading in more than 40 commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy, and agricultural and agri-based commodities.

BENEFITS OF TRADING ON MCX


India's no. 1 commodity exchange to trade in bullion futures. Highly liquid contracts. Deliverable contracts with internationally accepted gold and silver bars. Flexibility to choose from four different contract sizesGold (1 kg), Gold Mini (100 grams), Gold Guinea(8 grams), Gold Petal(1gram) and Gold Petal Delhi(1gram) and Silver (30 kgs), Silver Mini (5kgs), Silver Micro (1kg) and Silver (1000)that best meets the needs Highly efficient and transparent market.

GOLD
INTRODUCTION
Gold (Chemical Symbol-Au) is primarily a monetary asset and partly a commodity. Gold is the world's oldest international currency. Gold is an important element of global monetary reserves. With regard to the investment value, more than two-thirds of gold total accumulated holdings is with central banks' reserves, private players, and held in the form of jewellery. Less than one-third of gold's total accumulated holdings are used as commodity for jewellery in the western markets and industry.

APPLICATION
Gold has a long and fascinating history of use in a diverse range of industries and applications. In each of the applications it is used, gold provides outstanding performance due to its unique technical properties. Gold is also material of choice in medicine and dentistry as a consequence of its biocompatibility and in recent years it has emerged as a key nanomaterial. Global demand for gold is centered on four primary categories: jewellery, investment, central bank reserves and technology.

INDIAN SCENARIO
Gold is valued in India as a savings and investment vehicle and is the second preferred investment after bank deposits. ndia is the world's largest consumer of gold in jewellery as investment. In July 1997 the RBI authorized the commercial banks to import gold for sale or loan to jewellers and exporters. At present, 13 banks are active in the import of gold. This reduced the disparity between international and domestic prices of gold from 57 percent during 1986 to 1991 to 8.5 percent in 2001. Domestic consumption is dictated by monsoon, harvest and marriage season. Indian jewellery offtake is sensitive to price increases and even more so to volatility. In the cities gold is facing competition from the stock market and a wide range of consumer goods.

WORLD DEMAND AND SUPPLY

Why Invest in Gold

Adding gold to a portfolio introduces an entirely different asset class- a tangible & real asset which increases the portfolio's degree of diversification. Effective portfolio diversifier

As depicted above, while the overall return of a portfolio without gold is 14%, that of a portfolio with gold is over 16%. Hence an allocation of physical gold in a financial portfolio not just helps reduce the impact of the volatility created by the other asset classes like equity, bonds etc., but also increases the average return over a period of time. A financial portfolio containing gold is generally more robust because it improves the stability and predictability of better average returns. Effective hedge against currency risk. Due to its inverse relationship to dollar, gold has always proved to be an effective hedge over a period of time. Other Reasons More liquid as compared to the other asset classes Gold can be bought, sold or traded globally.

Performance of gold not linked to performance of any company, industry or government. Gold needs no professional manager unlike mutual funds Gold is an asset, which is not simultaneously a liability, unlike stocks. It doesn't require political & social stability to survive, in fact it thrives under worst societal conditions. Gold doesn't ever loose its intrinsic value. GOLD HISTORICAL PRICE CHART (FROM 1st MARCH 2011 TO 1st MARCH 2013)

YEAR 2007 2008 2009 2010 2011 2012 2013

GOLD RATE 10800 12500 14500 18500 26400 32000 29000

QUANTITY(000s) 7604891 GRMS 14024217 GRMS 12144967 GRMS 12052225 GRMS 12655760 GRMS 10287609 GRMS 4944414 GRMS

VALUE(RS. IN LAKHS) 71977660.21 171474192 184997191.4 219874783.8 314713353.7 305672442.6 140424196

Demand

The Consumer demand for gold is more than 3400 tonnes per year making it whopping $40 billion worth. More than 80% of the gold consumed is in the form of jewellery, which is generally pre-dominated by women. The Indian demand to the tune of 800 tonnes per year is making it the largest market for gold followed by USA, Middle East and China. About 80% of the Physical gold is consumed in the form of jewellery. If we include jewellery ownership, then India is the largest repository of gold in terms of total gold within the national boundaries.

GOLD PRICE AS ON 31ST MARCH FOR LAST 20 YEARS


YEAR 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 PRICE(RS/10GRMS) 4140 4598 4680 5160 4725 4045 4235 4380 4190 5010 5310 6065 6180 8490 9395 12125 15105 16320 20775 28075 29390

Gold Price 2013 (Rs/10gm) DATE 15th Apr,2013 16th Apr,2013 17th Apr,2013 18th Apr,2013 19th Apr,2013 20th Apr,2013 22nd Apr,2013 23rd Apr,2013 24th Apr,2013 25th Apr,2013 26th Apr,2013 27th Apr,2013 29th Apr,2013 30th Apr,2013 1st May,2013 2nd May,2013 3rd May,2013

RATE 27938 25665 25790 25654 25700 25816 26058 26390 26181 26430 27044 27079 27191 27183 26895 26548 26919

DATE 4th May,2013 6th May,2013 7th May,2013 8th May,2013 9th May,2013 10th May,2013 11th May,2013 13th May,2013 14th May,2013 15th May,2013 16th May,2013 17th May,2013 18th May,2013 20th May,2013 21st May,2013 22nd May,2013 23rd May,2013

RATE 26835 26961 27105 26725 27084 27155 26847 26987 26864 26704 26305 26092 25893 25848 26072 26079 25962

DATE 24th May,2013 25th May,2013 27th May,2013 28th May,2013 29th May,2013 30th May,2013 31st May,2013

RATE 26422 26421 26421 26463 26423 26619 27185

GOLD PRICE 2013(RS/10GM)


28500 28000 27500 PRICE/10 GM 27000 26500 26000 25500 25000 24500

DATE

GOLD DATA
Date 15-Apr-13 16-Apr-13 17-Apr-13 18-Apr-13 19-Apr-13 20-Apr-13 22-Apr-13 23-Apr-13 24-Apr-13 25-Apr-13 26-Apr-13 27-Apr-13 29-Apr-13 30-Apr-13 01-May-13 02-May-13 03-May-13 Open(Rs) 27450 25460 25650 25562 25940 25867 26184 26419 26290 26449 27135 27098 27200 27107 26833 26606 27020 High(Rs) 27450 26131 25900 25880 26043 26069 26542 26448 26485 27097 27447 27198 27329 27200 26859 27000 27300 Low(Rs) 25450 25270 25435 25333 25694 25867 26184 26062 26238 26449 26886 27086 27063 26810 26365 26543 26767 Close(Rs) 25634 25766 25679 25700 25804 26047 26363 26164 26388 27041 27055 27189 27151 26905 26540 26914 26825

04-May-13 06-May-13 07-May-13 08-May-13 09-May-13 10-May-13 11-May-13 13-May-13 14-May-13 15-May-13 16-May-13 17-May-13 18-May-13 20-May-13 21-May-13 22-May-13 23-May-13 24-May-13 27-May-13 28-May-13 29-May-13 30-May-13 31-May-13

26866 27006 27040 26745 27167 27100 26888 26888 26855 26700 26222 26044 25854 25790 26140 26174 26020 26463 26439 26426 26481 26636 27176

26970 27234 27049 27150 27214 27116 27015 26888 26918 26704 26222 26142 25854 26339 26362 26677 26480 26537 26489 26826 26659 27198 27308

26866 27005 26594 26712 26951 26586 26888 26676 26652 26188 25860 25776 25785 25373 25843 25902 26020 26250 26364 26202 26382 26555 26851

26962 27096 26722 27093 27166 26843 26999 26854 26707 26310 26131 25884 25835 26088 26110 25963 26440 26406 26446 26411 26630 27158 26874

28000 27500 27000 26500 26000 25500 25000 24500 24000 1-May-13 3-May-13 5-May-13 7-May-13 9-May-13 Open(Rs) High(Rs) Low(Rs) Close(Rs)

21-May-13

23-May-13

25-May-13

27-May-13

29-May-13

31-May-13

15-Apr-13

17-Apr-13

19-Apr-13

21-Apr-13

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25-Apr-13

27-Apr-13

29-Apr-13

11-May-13

13-May-13

15-May-13

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19-May-13

Demand
The Consumer demand for gold is more than 3400 tonnes per year making it whopping $40 billion worth. More than 80% of the gold consumed is in the form of jewellery, which is generally pre-dominated by women. The Indian demand to the tune of 800 tonnes per year is making it the largest market for gold followed by USA, Middle East and China. About 80% of the Physical gold is consumed in the form of jewellery while bars and coins occupy not higher than 10% of the gold consumed. If we include jewellery ownership, then India is the largest repository of gold in terms of total gold within the national boundaries. Regarding pattern of demand, there are no authentic estimates, the available evidence shows that about 80% is for jewellery fabrication for domestic demand, and 15% is for investor-demand (which is relatively elastic to gold-prices, real estate prices, financial markets, tax-policies, etc.). Barely 5% is for industrial uses. The demand for gold jewellery is rooted in societal preference for a variety of reasons - religious, ritualistic, a preferred form of wealth for women, and as a hedge against inflation. Rural India continues to absorb more than 70% of the gold consumed in India. The yellow metal used to play an important role in marriage and religious festivals in India. In the Hindu, Jain and Sikh community, gold and silver jewellery was a major component of the gifts given to a woman at the time of marriage. The annual consumption of gold, which was estimated at 65 tonnes in 1982, has increased to more than 700 tonnes in late 90s. Although it is likely that, with prosperity and enlightenment, there may be deceleration in demand, particularly in urban areas, it would be made good by growing demand on account of prosperity in rural areas. In the near future, therefore, the annual demand will continue to be over 600 tonnes per year.

Supply
Indian gold holding, which are predominantly private, is estimated to be in the range of 1000013000 tonnes. One fourth of world gold production is consumed in India and more than 60% of Indian consumption is met through imports. The domestic production of the gold is very limited which is around 9 tonnes in 2002 resulting in more dependence on imported gold. The availability of recycled gold is price sensitive and as such the dominance of the gold supply through import is in existence. The fabricated old gold scraps is price elastic and was estimated to be near 450 tonnes in 2002. It rose almost more than 40% compared to the previous year because of rise in gold price by more than 15%.

The demand-supply for gold in India can be summed up thus: 1. Demand for gold has an autonomous character. Supply follows demand. 2. Demand exhibits income elasticity, particularly in the rural and semi-urban areas. 3. Price differential creates import demand, particularly illegal import prior to the commencement of liberalization in 1990.

Price trends and factors that influence prices Indian gold prices follow more or less the international price trends. However, the strong domestic demand for gold and the restrictive policy stance are reflected in the higher price of gold in the domestic market compared to that in the international market at the available exchange rate.

Since the demand for gold is closely tied to the production of jewelry, gold prices tend to increase during the time of year when demand for jewellery is greatest. Christmas, Mothers Day and Valentine Day are all major shopping seasons and hence the demand for metals tends to be strong a few months ahead of these holidays. Also, the summer wedding season sees a large increase in the demand for metals, so price strength in March and April is not uncommon. On the other hand in November, December, January and February prices tend to decline and jewelers tend to have holiday inventory to unwind.

FACTORS AFFECTING THE PRICE OF GOLD

Gold jewellery has always played a very important role in the cultural heritage of Indian people. The yellow shiny metal is a solid indication of wealth and social ranking among various layers of Indian society making India one of the top consumers of this commodity in the world. Its really hard to imagine any Indian wedding or ceremony without beautiful women and men adorned in exquisite jewellery.

Here are some of the factors that effect the price of the gold: 1. Historical high demand for this precious metal in India necessary to supply huge jewelry market is the number one factor affecting the price of gold in India. Gold jewelry in India is an integral part of many traditional ceremonies like weddings, festivals, celebrations and else. 2. India is also worlds largest importer from other countries. Rising or lowering import costs inadvertently affect gold price in India today. India is unable to sustain adequate domestic yellow metal production due to mine resource shortages. Currently theres only one working gold mi ne in India called Kolar that can not physically satisfy high demands of the country. Indias historical gold prices had always been higher due to this fact. 3. Rising population in India triggers even higher demand for the metal driving gold price in India today even higher. 4. Due to low bank deposit interest rates, gold investment in India is a preferred method over any other investment mechanism.

5. The value of the US dollar is one of the major factors affecting gold price in India today. When the dollar is weak, the spot price of this precious metal is on the rise and vice versa. 6. Worlds supply is one of the most important determining factors for gold price in India today. Once, worlds gold supply sustains production shortages due to depleting mineral deposits, the prices will soar not only in India but all over the world. 7. Any favorable or unfavorable Government policy directly affects current gold prices in India. 8. India is known to be a country of parallel economy, money laundering and large scale tax evasions. Since this unaccounted money can not be kept in banks and the value of national currency is on the downfall, Indians prefer to buy gold bullion or jewelry to protect themselves from devaluation. 9. India is a country of contrasts where lavish palaces are mixed with shacks. Poorer layers of population prefer to keep their valuable assets in the form of jewelry so it can be easily carried in times of distress, floods and social unrest. 10. Worlds overall economic situation is a very important factor influencing gold prices in India. With many European countries being on the brink of bankruptcy like Greece, for example, or facing huge state budget deficits, multiple investors see gold as the only worthy commodity worth investing. If the worlds gold price is on the rise, it automatically affects Indian price for gold.

Analysis
Technical analysis We have collected the data of the past 45 days for the technical analysis.We can clearly see that on 15th April 2013, There is an aggressive selling in gold, level touching to a mark of 25500 on closing basis. From this point, the chart has shown an upward trend till 25 th April 2013, but the momentum was not able to touch and crossed the level of 27500. The gold prices has fluctuated between the range of 25500-27500 during the period 15th April,2013 to 31st May,2013. Thus from technical point of view, the support level of gold was 25500 and resistance level was 27500. From this chart, it can also be analyzed that gold would face a stiff resistance at 27500 and it will be difficult for the gold to cross this level. As per technicals, Sell call- one can sell at a level of 27300-27200 with a stop loss of 27500 (closing basis) for a target of 26100-26000 level. Buy call- I will suggest to buy only when it starts trading above 27500 levels (resistance level) on closing basis. Till then there is a downward trend in gold. Fundamental analysis The recent and rather significant drop in commodity prices has led many to wonder if this makes an attractive entry point, or is it beginning of a larger, more significant sell off. The recent downtrend in the gold is just because of the unloading of the gold reserves by Cyprus to fund the bailout as well as a general shift from the commodities to equities. First, in the unlikely case that Cyprus decided to sell its reserves, the supply would most likely not have a tremendous effect on spot prices. Secondly, commodities have historically traded rather close to the way equities have traded, thus since equities did not fall tremendously like commodities did, which led to believe that this is a short-term break in a long-term association. As we know that many gold investors are traditionally long term investors who are not simply interested in short term gains, in addition to using the metal as an inflation hedge to protect their wealth over long term. Thus making the metal fundamentally strong on demand side. Thus as per my analysis, The recent downward move in metals prices appears to be short-term and provides long-term investors with an attractive entry point for new positions, especially when compared to equity markets which are looking vulnerable.

SILVER
INTRODUCTION Silver (Chemical symbol-Ag) is a brilliant grey-white metal that is soft and malleable. Silvers unique properties include its strength, malleability, ductility, electrical and thermal conductivity, sensitivity, high reflectance of light, and reactivity. The main source of silver is lead ore, although it can also be found associated with copper, zinc and gold and produced as a by-product of base metal mining activities. Secondary silver sources include coin melt, scrap recovery, and dis-hoarding from countries where export is restricted. Secondary sources are price sensitive.

APPLICATIONS Demand for silver is based on three main factors: industrial, photography, and jewellery and silverware. Together, the three categories represent around 77% of the annual silver consumption. Silver is used in electrical contacts and conductors, mirrors, and as a catalyst in chemical reactions. It is also used to make dental alloys, coins, etc. Owing to silvers versatility, there are a few metals that can substitute it in most applications, particularly in high-tech uses in which reliability, precision, and safety are paramount.

MARKET CHARACTERISTICS Silver is unique amongst metals due to the fact that it can be classified as both a precious metal and an industrial metal. Today, silver is sought as a valuable and practical industrial commodity and as an investment. Silver is an important element of the global monetary reserves. It is an effective portfolio diversifier.

INDIAN SCENARIO The average annual demand for silver in India is about 2500 Metric tonnes (MT) per year. In 2011, the countrys production was around 342.13 MT. Nearly 60% of India's silver demand comes from farmers and rural India, who store their savings in the form of silver bangles and coins.

WORLD DEMAND AND SUPPLY

SILVER HISTORICAL PRICE CHART (FROM 3 MARCH 2011 TO 3 DEC. 2012)

YEAR SILVER RATE 2007 2008 2009 2010 2011 2012 2013 18960 17800 26850 46300 51350 56280 45500

QUANTITY thousands) 306790.07 KGS 393747.525 KGS 431439.545 KGS 599843.995 KGS 1013923.254 KGS 518535.87 KGS 221064.03 KGS

TRADED(in VALUE lakhs) 57424526.09 83980721.19 103092321.07 194143239.53 246117507.12 297774497.73 114236865.68

TRADED(in

SILVER PRICE AS ON 31ST MARCH FOR LAST 20 YEARS


YEAR 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 PRICE(RS/KG) 5489 7124 6335 7346 7345 8560 7615 7900 7215 7875 7695 11770 10675 17405 19520 23625 22165 27255 56900 56798 52952

Silver Price May 2013 (Rs/kg) RATE DATE 48873 15th Apr,2013 44510 16th Apr,2013 44200 17th Apr,2013 43600 18th Apr,2013 43236 19th Apr,2013 42958 20th Apr,2013 43431 22nd Apr,2013 43722 23rd Apr,2013 42885 24th Apr,2013 42970 25th Apr,2013 45242 26th Apr,2013 44874 27th Apr,2013 45040 29th Apr,2013 45370 30th Apr,2013 44854 1st May,2013 43813 2nd May,2013

DATE 3rd May,2013 4th May,2013 6th May,2013 7th May,2013 8th May,2013 9th May,2013 10th May,2013 11th May,2013 13th May,2013 14th May,2013 15th May,2013 16th May,2013 17th May,2013 18th May,2013 20th May,2013 21st May,2013

RATE 44300 44931 45180 45190 44885 44857 45151 45050 45230 45120 44531 43267 43202 42799 42632 43219

DATE 22nd May,2013 23rd May,2013 24th May,2013 25th May,2013 27th May,2013 28th May,2013 29th May,2013 30th May,2013 31st May,2013

RATE 43141 43262 43504 43490 43490 43640 43215 43677 44499

SILVER PRICE 2013(RS/KG)


PRICE/10 GM 50000 48000 46000 44000 42000 40000 38000

DATE

SILVER DATA
Date 15-Apr-13 16-Apr-13 17-Apr-13 18-Apr-13 19-Apr-13 20-Apr-13 22-Apr-13 23-Apr-13 24-Apr-13 25-Apr-13 26-Apr-13 27-Apr-13 29-Apr-13 30-Apr-13 01-May-13 02-May-13 03-May-13 04-May-13 06-May-13 07-May-13 Open( Rs) 49000 44541 44636 44000 44360 43880 44389 44053 43525 44139 45999 45637 45684 45907 45101 44144 44896 45000 45213 45031 High(Rs ) 49000 45697 45065 44700 44516 44200 44800 44209 44020 45931 46520 45825 46248 45989 45101 45248 45670 45192 45628 45031 Low(Rs ) 44391 43588 43710 43596 43402 43880 44101 43060 43374 43826 45058 45530 45640 45060 43540 43818 44052 45000 44905 44180 Close(Rs ) 45252 45058 44429 43979 43720 44178 44415 43512 43599 45784 45468 45777 45869 45226 44052 44633 44927 45177 45168 44861 Date 08-May-13 09-May-13 10-May-13 11-May-13 13-May-13 14-May-13 15-May-13 16-May-13 17-May-13 18-May-13 20-May-13 21-May-13 22-May-13 23-May-13 24-May-13 27-May-13 28-May-13 29-May-13 30-May-13 31-May-13 Open( Rs) 44882 45094 45114 45221 44901 45054 44400 43184 43270 42680 42550 43054 43202 43002 43610 43468 43550 43381 43590 44377 High(Rs ) 45157 45439 45175 45372 45340 45088 44439 43381 43280 42680 44294 43648 44600 43680 43665 43742 43926 43789 44925 44660 Low(Rs ) 44462 44742 44275 45216 44861 44152 42950 42281 42551 42550 40749 42420 43021 42733 43050 43408 42960 43126 43526 43350 Close(Rs ) 44906 45165 45062 45284 45118 44516 43314 43262 42814 42629 43263 43170 43226 43571 43473 43610 43262 43707 44421 43616

50000 49000 48000 47000 46000 45000 44000 43000 42000 41000 40000 1-May-13 3-May-13 5-May-13 7-May-13 9-May-13

Open(Rs) High(Rs) Low(Rs) Close(Rs)

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Demand Demand for silver is built on three main pillars; industrial and decorative uses, photography and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In recent years, the main world demand for silver is no longer monetary, but industrial. With the growing use of silver in photography and electronics, industrial demand for silver accounts for roughly 85% of the total demand for silver. Jewelry and silverware is the second largest component, with more demand from the flatware industry than from the jewelry industry in recent years. India, the largest consumer of silver, is gearing up to start hallmarking of the white precious metal by April. India annually consumes around 4,000 tonnes of silver, with the rural areas accounting for the bulk of the sales. India's demand for silver increased by 177 per cent over the past 10 years as compared to 517 tonnes in 1991. According to GFMS, India has emerged as the third largest industrial user of silver in the world after the US and Japan.

Supply The supply of silver is based on two facts, mine production and recycled silver scraps. Mine production is surprisingly the largest component of silver supply. It normally accounts for a little less than 2/3 rd of the total (last year was slightly higher at 68%). Fifteen countries produce roughly 94 percent of the worlds silver from mines. The most notable producers are Mexico, Peru, the United States, Canada and Australia. Mexico, the largest producer of silver from mines. Peru is the worlds second largest producer of silver. Silver is often mined as a byproduct of other base metal operations, which accounts for roughly four-fifths of the mined silver supply produced annually. Known reserves, or actual mine capacity, is evenly split along the lines of production.

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The mine production is not the sole source - others being scrap, disinvestments, government sales and producers hedging. Scrap is the silver that returns to the market when recovered from existing manufactured goods or waste. Old scrap normally makes up around a fifth of supply. Scrap supply increased marginally last year up by 1.2%. The other major source of silver is from refining, or scraps recycling. Because silver is used in the photography industry, as well as by the chemical industry, the silver used in solvents and the like can be removed from the waste and recycled. The United States recycles the most silver in the world, accounting for roughly 43.6 million ounces. Japan is the second largest producer of silver from scrap and recycling, accounting for roughly 27.8 million troy ounces in 1997. In the United States and Japan, threequarters of all the recycled silver comes from the photographic scrap, mainly in the form of spent fixer solutions and old X-ray films.

Factors influencing prices of the silver The prices of silver, like that of other commodities, are dictated by forces of demand and supply and consumption. Besides, a host of social, economic and political factors have powerful bearing on silver prices. As in the case of gold prices, political tensions, the threat affects the price of silver too. When trading and movement of silver is restricted, within or outside national boundaries, prices move in accordance with demand and supply conditions prevalent in mat environment Price of silver is also influenced by changes in factors such as inflation (real or perceived), changing values of paper currencies, and fluctuations in deficits and interest rates, etc. Although prices and incomes are important factors, they are also influenced by factors such as tastes, technological change and market liberalization. Approximately 70 percent of the silver mined in the western hemisphere is mined as a byproduct of other metal products, such as gold, copper, nickel, lead, and zinc. As such, the price of these metals greatly affects the supply of silver mined in any year. As die price of die omer metal products increases, die increased profit margin to mine operations stimulate greater production of die omer metals, and as a result, die production of silver increases in tandem. Because silver is a precious metal, its price is determined by die supply and demand ratio at any given moment. As is the case with other precious metals, there is a limited amount of silver in the world. It is not a product mat can be manufactured en masse, and, mere fore is subject to issues such as weamer and politics mat may affect silver mining operations.

Factors effecting price of silver: Large traders or investors The silver market is much smaller in value than the gold market. The London silver bullion market turns over 18 times less money than gold. With physical demand estimated at only $15.2 billion per year, it is possible for a large trader or investor to influence the silver price either positively or negatively. A big driver for silver sales in 2012 was Morgan Stanley and their short position holdings. This has influenced the silver market, along with an apparent shortage of above ground silver available for investment. As silver continues to boom for industrial uses, less of the metal is available for physical bullion for investment. That, coupled with paper investment uncertainty has driven the market prices wildly. Short selling In April 2007, Commitments of Traders Report revealed that four or fewer traders held 90% of all short silver futures contracts totalling 245 million troy ounces, which is equivalent to 140 days of production. According to Ted Butler, one of these banks with large silver shorts, JPMorgan Chase, is also the custodian of the SLV silver exchange-traded fund (ETF). Some silver analysts have pointed to a potential conflict of interest, as close scrutiny of Comex documents reveals that ETF shares may be used to "cover" Comex physical metal deliveries. This led analysts to speculate that some stores of silver have multiple claims upon them. On 25 September 2008 the Commodity Futures Trading Commission (CFTC) relented and probed the silver market after persistent complaints of foul play.

Industrial, commercial, and consumer demand. The traditional use of silver in photographic development has been dropping since 2000 due to the decline of film photography. However, silver is also used in electrical appliances (silver has the lowest resistivity of industrial metals), photovoltaics (one of the highest reflectors of light), RoHS compliant solder, clothing and medical uses (silver has antibacterial properties). Other new applications for silver include RFID tags, wood preservatives, water purification and food hygiene. The Silver Institute have seen a noticeable increase in silver-based biocide products coming onto the market, as they explain:

Currently were seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and consumer. New products are being introduced almost daily. Established companies are incorporating silver based products in current lines - clothing, refrigerators, mobile phones, computers, washing machines, vacuum cleaners, keyboards, countertops, furniture handles and more. The newest trend is the use of nano-silver particles to deliver silver ions. Data from 2010 reveals that a majority of silver is being used for industry (487.4 million ounces), jewelry (167.0 million ounces), and investments (101.3 million ounces). The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial and jewelry usage.

Hedge against financial stress Silver, like all precious metals, may be used as a hedge against inflation, deflation or devaluation. As Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund, explained in September 2010: The currencies of all the major countries, including ours, are under severe pressure because of massive government deficits. The more money that is pumped into these economies the printing of money basically then the less valuable the currencies become.

Analysis
Technical analysis If we compare the technical charts of gold and silver, silver has shown more drastic selling as compare to gold. This drastic fall has lead silver to touch a new lower level of 45252. After this level, silver does not even able to sustain the momentum and further continues to decline. Due to this drastic fall in silver price, the silver has become technically very weak. The silver prices created a stiff resistance level of 46200 and support at a level of 42400. If the silver breaks the level of 46200 further buying can be expected till level 0f 48000. Thus from technical analysis, there is a sell call in silver at a level of 44800 with a stop loss of 46200 for a target of 42500.

Fundamental analysis For years, silver has acted as an attractive investment because it diversifies investment assests. Also, it has inherent value that is permanent and it provides a stability that stocks and other funds cannot deliver. The demand for silver has also increased over years because of its extensive use in industry and decorative purposes, photography, jewellery and silverware. These uses represent more than 95% of annual silver demand Also,With unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges, it is an element without substitution. Thus making it a precious metals. From the past few years, silver has been outperforming gold. In 2012 itself, silver offered higher returns of 8.4 per cent compared with 6.33 per cent for gold. This means, silver has more potential to rise in the future, thus it becomes necessary for an investor to consider silver for its portfolio for long term investment.

Conclusion
Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80% logical. Psychological or logical may be open for debate, but there is no questioning the current price of a security. After all, it is available for all to see and nobody doubts its legitimacy. The price set by the market reflects the sum knowledge of all participants, and we are not dealing with lightweights here. These participants have considered (discounted) everything under the sun and settled on a price to buy or sell. These are the forces of supply and demand at work. By examining price action to determine which force is prevailing, technical analysis focuses directly on the bottom line: What is the price? Where has it been? Where is it going? Fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and the track record of an analyst before jumping off the deep end. Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don't happen by accident; they are an important PR tool for companies. Investors should become skilled readers to weed out the important information and ignore the hype.

REFRENCES
http://www.neerajbhagat.com/gold-silver-rates.html http://www.mcxindia.com/ http://www.moneycontrol.com http://www.kitco.com/charts/techcharts_gold.html http://www.kairoscommodities.com/Sample-Report/Sample-report/ http://www.commodityonline.com/news http://www.goldbullionpro.com http://www.usagold.com http://www.silverinstitute.org/ http://www.gold.org/ www.marketonmobile.com http://www.indiabullion.com/ http://www.investing.com/ http://www.investopedia.com/

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