Desertation Gold

GOLD: An Investment Option A Study
1.1 Income 1.2 Savings 1.3 Investment 1.4 Basic Investment Objectives 1.5 Instruments or Vehicles of Investments
1.6 Gold -Introduction
1.7 Gold-History 1.8 Gold-Applications 1.9 Factors Influencing Gold Price 1.10 Market Dynamics Factors Affecting Gold Prices 1.11 Gold: As an Investment 1.12 Ways to Invest In Gold 1.13 Supply of Gold in India 1.14 India and Gold 1.15 Price Records 1.16 Investment Strategies 1.17 Purity Norms 1.18 Weight Equivalent 1.19 Comparison-Various Forms of Gold 1.20 Physical Gold vs. Gold Mining Shares 1.21 Risks of Gold
Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 1

Chapter 1 1.1 Income In economics, factor income is the flow (that is, measured per unit of time) of revenue accruing to a person or nation from labor services and from ownership of land and capital. Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time."For firms, income generally refers to net-profit: what remains of revenue after expenses have been subtracted. In the field of public economics, it may refer to the accumulation of both monetary and non-monetary consumption ability, the former being used as a proxy for total income. The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments is termed as Income in general sense.
1.2 Savings Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan. Saving also includes reducing expenditures, such as recurring costs. In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher. Saving is closely related to investment. By not using income to buy consumer goods and services, it is possible for resources to instead be invested by being used to produce fixed capital, such as factories and machinery. Saving can therefore be vital to increase the amount of fixed capital available, which contributes to economic growth. However, increased saving does not always correspond to increased investment. If savings are stashed in a mattress or otherwise not deposited into a financial intermediary like a bank there is no chance for those savings to be recycled as investment by business. This means that saving may increase without increasing investment, possibly causing a short-fall of demand (a pile-up of inventories, a cut-back of production, employment, and income, and thus a recession) rather than to economic growth. In the short term, if saving falls below investment, it can lead to a growth of aggregate demand and an economic boom. In the long term if saving falls below investment it eventually reduces investment and detracts from future growth. Future growth is made possible by foregoing present consumption to increase Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 2

investment. However savings kept in a mattress amount to an (interest-free) loan to the government or central bank, who can recycle this loan.
1.2 Investment Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain that upon thorough analysis has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. As such, those shareholders who fail to thoroughly analyze their stock purchases, such as owners of mutual funds, could well be called speculators. Indeed, given the efficient market hypothesis, which implies that a thorough analysis of stock data is irrational, all rational shareholders are, by definition, not investors, but speculators. Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments. To avoid speculation an investment must be either directly backed by the pledge of sufficient collateral or insured by sufficient assets pledged by a third party. A thoroughly analyzed loan of money backed by collateral with greater immediate value than the loan amount may be considered an investment. A financial instrument that is insured by the pledge of assets from a third party, such as a deposit in a financial institution insured by a government agency may be considered an investment. Examples of these agencies include, in the United States, the Securities Investor Protection Corporation, Federal Deposit Insurance Corporation, or National Credit Union Administration, or in Canada, the Canada Deposit Insurance Corporation. Promoters of and news sources that report on speculative financial transactions such as stocks, mutual funds, real estate, oil and gas leases, commodities, and futures often inaccurately or misleadingly describe speculative schemes as investment. Investment: thorough analysis and security. Speculation: analysis and some risk. Gambling: lack of analysis and lack of safety The money you earn is partly spent and the rest is saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 3

future. This is called Investment. In other words, Investment is the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. It's actually pretty simple: investing means putting your money to work for you. Essentially, it's a different way to think about how to make money. There are many different ways you can go about making an investment. This includes putting money into stocks, bonds, mutual funds, or real estate (among many other things), or starting your own business. Sometimes people refer to these options as "investment vehicles," which is just another way of saying "a way to invest." Each of these vehicles has positives and negatives, which will be discussed later in the argument. The point is that it doesn't matter which method you choose for investing your money, the goal is always to put your money to work so it earns you an additional profit. Even though this is a simple idea, it's the most important concept in the current scenario to understand.
1.4 Basic Investment Objectives Investing is a conscious decision to set money aside for a long enough period in an avenue that suits your risk profile. The options for investing our savings are continually increasing, yet every single investment vehicle can be easily categorized according to three fundamental characteristics - Safety, Income and Growth - which also correspond to types of investor objectives. While it is possible for an investor to have more than one of these objectives, the success of one must come at the expense of others. Here we examine these three types of objectives, the investments that are used to achieve them and the ways in which investors can incorporate them in devising a strategy.
Investment is done with some Objectives. These objectives are as: Safety Perhaps there is truth to the axiom that there is no such thing as a completely safe and secure investment. Yet we can get close to ultimate safety for our investment funds through the purchase of government-issued securities in stable economic systems, or through the purchase of the highest quality corporate bonds issued by the economy's top companies. Such Securities are arguably the best means of preserving principal while receiving a specified rate of return. The safest investments are usually found in the money market and include such securities as Treasury bills (T-bills), certificates of deposit, commercial paper or bankers

acceptance slips; or in the fixed income (bond) market in the form of municipal and other government bonds, and in corporate bonds. Income However, the safest investments are also the ones that are likely to have the lowest rate of income return, or yield. Investors must inevitably sacrifice a degree of safety if they want to increase their yields. This is the inverse relationship between safety and yield: as yield increases, safety generally goes down, and vice versa.
Growth of Capital Growth of capital is most closely associated with the purchase of common stock, particularly growth securities, which offer low yields but considerable opportunity for increase in value. Blue-chip stocks, by contrast, can potentially offer the best of all worlds by possessing reasonable safety, modest income and potential for growth in capital generated by long-term increases in corporate revenues and earnings as the company matures. Secondary Objectives Cost of Inflation One needs to invest wisely to meet the cost of Inflation. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. For example, if there was a 6% inflation rate for the ext 20 years, a Rs.100 purchase today would cost Rs.321 in 20 years. Remember to look at an investments real rate of return, which is the return after inflation. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. For example, if the annual inflation rate is 6%, then the investment will need to earn more than 6% to ensure it increases in value.
Source: Bloomberg. Data as on 31st Dec, 2009.

Tax Minimization An investor may pursue certain investments in order to adopt tax minimization as part of his or her investment strategy. A highly-paid executive, for example, may want to seek investments with favorable tax treatment in order to lessen his or her overall income tax burden. Making contributions to an IRA or other tax-sheltered retirement plan can be an effective tax minimization strategy. By far, tax-saving is the most compelling reason for investors to set aside money for the long term
Marketability / Liquidity Common stock is often considered the most liquid of investments, since it can usually be sold within a day or two of the decision to sell. Bonds can also be fairly marketable, but some bonds are highly illiquid, or non-tradable, possessing a fixed term. Similarly, money market instruments may only be redeemable at the precise date at which the fixed term ends.
Retirement Anyone who will retire needs to plan for it. There is more than one reason to save for retirement. The all important reason is the rising cost of living. Its called inflation. If you start planning for retirement early on, you can bridge the gap between what you have in your hand today and what you would like to have when you retire. If you begin saving for retirement early on in your life, you can set aside smaller amounts. You can also take on more risk by investing larger amounts in equities i.e., stocks and equity funds. If you delay saving for retirement, you will have to invest larger sums of money to save for the same amount; also the share of equity investments as a portion of your retirement savings will have to be lower. The older you are when you start, the more risk averse you will have to be. Your retirement portfolio will actually be a mix of stocks, debt securities, index funds and other money market instruments. This mix will change as you do, moving increasingly toward low risk guaranteed investments as you age. Unless planned well, retirement phase will be a downhill ride.
1.5 Instruments or Vehicles of Investments There are many ways to invest your money. Of course, to decide which investment vehicles are suitable for you, you need to know their characteristics and why they may be suitable for a particular investing objective. Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 6

Bonds Insurance
Mutual Funds
Cash
Equity Market
Gold
Fixed Deposits
Real Estate
Dept Market
Other
Debt Instruments Debt instruments protect your capital, therefore the importance of a solid debt portfolio. This not only gives stability, but also offers you optimal returns, liquidity and tax benefits. Debt products, besides safeguarding your capital, can be used to meet short, medium and long-term financial needs.
Bonds It is a fixed income instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest on a specified date, called the Maturity Date. The main attraction of bonds is their relative safety. If you are buying bonds from a stable government, your investment is virtually guaranteed, or risk-free. The safety and stability, however, come at a cost. Because there is little risk, there is little potential return. As a result, the rate of return on bonds is generally lower than other securities.
Mutual Funds
A mutual fund is a body corporate registered with SEBI that pools money from the individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as Equity Shares, Government Securities, Bonds, Debentures, etc. The income earned through these investments and the capital appreciations realized are shared by its unit

holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Mutual fund units are issued and redeemed by the Asset Management Company (AMC) based on the funds net asset value (NAV), which is determined at the end of each trading session. Mutual funds are considered to be the best investments as on one hand it provides good returns and on the other hand it gives us safety in comparison to other investments avenues.
Equity Equities are often regarded as the best performing asset class vis--vis its peers over longer time frames. However equity-oriented investments are also capable of exposing investors to the highest degree of volatility and risk. There are a number of factors, which affect the performance of equities ad studying and understanding all of them on an ongoing basis, can be challenging for most.
Insurance Life insurance has traditionally been looked upon pre-dominantly as an avenue that offers tax benefits while also doubling up as a saving instrument. The purpose of life insurance is to indemnify the nominees in case of an eventuality to the insured. In other words, life insurance is intended to secure the financial future of the nominees in the absence of the person insured.
Gold
In India, gold has traditionally played a multi-faceted role. Apart from being used for adornment purpose, it has also served as an asset of the last resort and a hedge against inflation and currency depreciation. India has more than 13,000 tones of hoarded gold, which translates to around Rs.6,50,000 crores. Gold is an asset class thats associated with safety. However, the ups and down that the yellow metal has seen over the last few months, has made it look similar to other market investment assets. This is due to an unprecedented demand for gold as an investment avenue since the last couple of years. Gold has attracted a high level of attention in last couple of years, with an image shift from a non-volatile asset to a hot investment avenue. The future outlook for the metal looks positive given its proven linear relationship with the crude oil and non-linear with the US dollar. The

much-awaited gold exchange-traded funds would provide a very good vehicle to the investors and a sensible alternative to the current forms available for investment. Real Estate Real estate is a great investment option, as it gives you capital appreciation and rental income. Its an investment option since it fights inflation. The fundamentals for investing in property markets remain strong in India - relatively low interest rates, strong capital flows, high employment growth, abundant liquidity, attractive demographics (young population and migration from West), increase in affordability, and a large supply of stock to keep up with demand and focus on quality. The price you pay for a property should reflect the future rent/income at which you let it. As in the stock market, the prices in real estate are also driven by sentiments. All that is required to reverse a price movement is a change in sentiment.
1.6 Gold -Introduction
Gold has long been considered the most desirable of precious metals, and its value has been used as the standard for many currencies in history. Gold has been used as a symbol for purity, value, royalty. One of the salient features about the gold is that a single gram of weight is not at all wasted since its exploration. It has been rounding in different hands in one or the other way. The history of gold starts from 2600BC. A huge description is available in the Egyptian Hieroglyphs. It may be the first metal used by humans and was valued for ornamentation and rituals. Important locations famous in the name of gold are Red sea in Saudi Arabia, Lydia, Romania, Las medullas, in Spain, Rosia Montana in Transylvania,
Central America, Peru and Columbia. Today, gold has emerged as an important mean for investments also. Volatile markets and unstable economic conditions have also added to it. China is largest producer followed by South Africa. But India is the largest consumer of gold, where it is largely used for jewelry together with investment. Indias diversified religious customs and rituals have helped to the high demand for gold. Gold is a chemical element with the symbol Au (from its Latin name aurum) and atomic number 79. It is a highly sought-after (required) precious metal, having been used as money, as a store of value, in jewelry, in sculpture, and for ornamentation since the beginning of recorded history. The metal occurs as nuggets (chunk) or grains in rocks, underground "veins" (layer)and in alluvial deposits . Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 9

Alluvium ("to wash against") is soil or sediments deposited by a river or other running water. Alluvium is typically made up of a variety of materials, including fine particles of silt and clay and larger particles of sand and gravel. Gold is dense (solid), soft, shiny and the most malleable (flexible) substance known. Pure gold has a bright yellow color traditionally considered attractive. It is one of the coinage (currency) metals and formed the basis for the gold standard used before the collapse of the Bretton Woods system (international economic system)in 1971. The ISO currency code of gold bullion is XAU. Modern industrial uses include dentistry and electronics, where gold has traditionally found use because of its good resistance to oxidative (a chemical reaction) corrosion (decay).
1.7 Gold-History The symbol for the Sun has been used since ancient times to represent gold. The Turin mining papyrus Gold has been known and highly-valued since prehistoric times. It may have been the first metal used by humans and was valued for ornamentation and rituals. Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was "more plentiful than dirt" in Egypt. The south-east corner of the Black Sea was famed for its gold. Exploitation is said to date from the time of Midas, and this gold was important in the establishment of what is probably the world's earliest coinage in Lydia between 643 and 630 BC.
The Romans developed new methods for extracting gold on a large scale using hydraulic mining methods, especially in Spain from 25 BC onwards and in Romania from 150 AD onwards. The Mali Empire in Africa was famed throughout the old world for its large amounts of gold. Mansa Musa, ruler of the empire (13121337) became famous throughout the old world for his great hajj to Mecca in 1324. When he passed through Cairo in July of 1324, he was reportedly accompanied by a camel train that included thousands of people and nearly a hundred camels. He gave away so much gold that it took over a decade for the economy across North Africa to recover, due to the rapid inflation that it initiated.During the 19th century, gold rushes occurred whenever large gold deposits were discovered. The first documented discovery of gold in the United States was at the Reed Gold Mine near George Ville, North Carolina in 1803. The first major gold strike in the United States occurred in a small north Georgia town called Dahlonega. Further gold rushes occurred in California, Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 10

Colorado, Otago, Australia, Witwatersrand, Black Hills, and Klondike. Because of its historically high value, much of the gold mined throughout history is still in circulation in one form or another.
1.8 Gold-Applications In various countries, gold is used as a standard for monetary exchange, in coinage and in jewelry. Pure gold is too soft for ordinary use and is typically hardened by alloying with copper or other base metals. The gold content of gold alloys is measured in carats (k), pure gold being designated as 24k.
1.9 Factors Influencing Gold Price Increased Govt. War on Terrorism Spending & Debts. Weak $ Increasing money supply Low bond yield Slowing of US GDP Liberalization of Chinese citizens to buy gold No New Gold mines Weakening US dollar China $ reserve become Negative interest questionable rates Increases supply Chinese Gold demand increased by 20% World production consistent Increasing demand leading to Chindia Growth High demand for Oil Stronger Euro Weak Dollar higher prices Higher Oil leads to even higher Gold Higher Gold Prices prices Higher Gold Prices Higher Gold Prices Higher Gold Prices Higher Gold Prices Higher Gold Prices

1.10 Market Dynamics Factors affecting Gold Prices
Supply Side
Other Factors
Demand Side
New Gold Discoveries
Financial & Economical Crises
New Gold Discoveries
Central Bank Reserves
Inflation
Industrial Demand
Political Risk
Golden China
Dollar
Indian Wedding Season
Figure No. 1.11 Gold: As an Investment
Factors affecting Gold Prices
There are enough reasons why gold should be included in any investor's portfolio whether in physical or paper form. Investing in gold ETFs will give the investor all the advantages of investing in gold while eliminating drawbacks of physical gold -- cost of storage, liquidity and purity, among others.
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social, or fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is also subject to speculation as other commodities are, especially through the use of futures contracts and derivatives. The history of the gold standard, the role of gold reserves in central banking, gold's low correlation with other

commodity prices, and its pricing in relation to fiat currencies during the financial crisis of 20072010, suggest that gold has features of being money.
1.12 Ways to Invest in Gold Gold is a popular avenue of investment and is generally bought as hedge against inflation and economic crisis. It has a cult following in India where it is considered to be a symbol of Goddess Lakshmi and an epitome of wealth and prosperity. Although gold prices have gone through the roof in recent years, Indians continue to be major buyers of gold across the world. You can invest in gold in many ways. It can be bought in the form of jewelery, coins or bars or through ETFs. The purpose of your purchase determines the form of holding.
Following are the ways to invest in the Gold:
Physical Form Bars Coins Jewellery
Non-Physical Form Exchange-traded funds (ETFs) Certificates Accounts Derivatives, CFDs and spread betting Mining companies Stocks
Physical Gold:
There are many savings and investment options available in India. One of the options is gold. Gold has been valued since prehistoric times and is the investment option that has been seen as the ultimate form of safe haven investment and the only true form of wealth.
Gold has been popular in India because it acted as a good hedge against inflation. There is so much uncertainty in the world in terms of economic growth and geopolitics, it is no surprise that many investors, big and small have chosen to hedge(barrier of closely growing bushes ) their investments through gold .
BARS The most traditional way of investing in gold is by buying bullion gold bars. In some countries, like Argentina, Austria, Liechtenstein and Switzerland, these can easily be bought or sold at the major banks. Alternatively, there are bullion dealers that provide the same Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 13

service. Bars are available in various sizes. For example in Europe, Good Delivery bars are approximately 400 troy ounces (12 kg).[37] 1 kilogram (32ozt) are also popular, although many other weights exist, such as the 10oz, 1oz, 10 g, 100 g, 1 kg, 1 Tael, and 1 Tola. Bars generally carry lower price premiums than gold bullion coins. However larger bars carry an increased risk of forgery due to their less stringent parameters for appearance. While bullion coins can be easily weighed and measured against known values, most bars cannot, and gold buyers often have bars re-assayed. Larger bars also have a greater volume in which to create a partial forgery using a tungsten-filled cavity, which may not be revealed by an assay.[38]Efforts to combat gold bar counterfeiting include kine bars which employ a unique holographic technology and are manufactured by the Argor-Heraeus refinery in Switzerland.
COINS Gold coins are a common way of owning gold. Bullion coins are priced according to their fine weight, plus a small premium based on supply and demand (as opposed to numismatic gold coins which are priced mainly by supply and demand based on rarity and condition).The Krugerrand is the most widely-held gold bullion coin, with 46,000,000 troy ounces (1,400 tonnes) in circulation. Other common gold bullion coins include the Australian Gold Nugget (Kangaroo), Austrian Philharmoniker (Philharmonic), Austrian 100 Corona, Canadian Gold Maple Leaf, Chinese Gold Panda, Malaysian Kijang Emas, French Coq dOr (Golden Rooster), Mexican Gold 50 Peso, British Sovereign, and American Gold Eagle. Coins may be purchased from a variety of dealers both large and small. Fake gold coins are not uncommon, and are usually made of gold-plated lead.
JEWELLERY The gems and jewellery industry occupies an important position in the Indian economy. It is a leading foreign exchange earner, as well as one of the fastest growing industries in the country. The two major segments of the sector in India are gold jewellery and diamonds. Gold jewellery forms around 80 per cent of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond and gemstone studded jewellery. Besides, India is world's largest cutting and polishing Industry for diamonds, well supported by government policies and the banking sector with around 50 banks providing nearly $3 billion of credit to the Indian diamond industry. A predominant portion of the gold jewellery manufactured in India is consumed in the domestic market. However, a major Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 14

portion of the rough, uncut diamonds processed in India is exported, either in the form of polished diamonds or finished diamond jewellery. The largest consumer of gold worldwide, India is also the leading diamond cutting nation. Gold and precious gems have played a pivotal role in the Indian social fabric and economy. Precious gems and jewellery are a part and parcel of Indian traditions and customs. Gold has traditionally been valued in India as a savings-and investment vehicle and even today, continues to be the second most popular instrument after bank deposits. Gems and jewellery is one of the fastest growing sectors in the Indian economy with an annual growth rate of approximately 15 per cent. The gems and jewellery industry accounts for nearly 20 per cent of the total Indian exports and employs over 1.3 million people, directly or indirectly. The Gems and Jewellery (G&J) market essentially comprises of sourcing, processing, manufacturing and selling of precious metals and gemstones, such as, Gold, Platinum, Silver, Diamond, Ruby, and Sapphire etc. The G&J market is a significant contributor to the Indian economy, based on the size of the domestic market and through its contribution to the countrys exports. India is the largest consumer of gold (around 20 percent of global consumption) and also the largest diamond processor (around 90 percent by pieces and 55 percent by value of the global market).
Non-Physical Form/Electronic form
Exchange-traded funds (ETFs) Gold exchange-traded products may include ETFs, ETNs, and CEFs which are traded like shares on the major stock exchanges. The first gold ETF, Gold Bullion Securities (ticker symbol "GOLD"), was launched in March 2003 on the Australian Stock Exchange, and originally represented exactly 0.1 troy ounces (3.1 g) of gold. As of November 2010, SPDR Gold Shares is the second-largest exchange-traded fund (ETF) in the world by market capitalization. Gold ETPs represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. However exchange-traded gold instruments, even those which hold physical gold for the benefit of the investor, carry risks beyond those inherent in the precious metal itself. For example the most popular gold ETP (GLD) has been widely criticized, and even compared with mortgage-backed securities, due to features of its complex structure. Typically a small commission is charged for trading in gold ETPs and a small annual storage fee is charged. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 15

by each certificate, so the amount of gold in each certificate will gradually decline over time. Exchange-traded funds, or ETFs, are investment companies that are legally classified as open-end companies or Unit Investment Trusts (UITs), but that differ from traditional openend companies and UITs. The main differences are that ETFs do not sell directly to investors and they issue their shares in what are called "Creation Units" (large blocks such as blocks of 50,000 shares). Also, the Creation Units may not be purchased with cash but a basket of securities that mirrors the ETF's portfolio. Usually, the Creation Units are split up and re-sold on a secondary market.TF shares can be sold in basically two ways. The investors can sell the individual shares to other investors, or they can sell the Creation Units back to the ETF. In addition, ETFs generally redeem Creation Units by giving investors the securities that comprise the portfolio instead of cash. Because of the limited redeemability of ETF shares, ETFs are not considered to be and may not call themselves mutual funds.
Certificates Gold certificates allow gold investors to avoid the risks and costs associated with the transfer and storage of physical bullion (such as theft, large bid-offer spread, and metallurgical assay costs) by taking on a different set of risks and costs associated with the certificate itself (such as commissions, storage fees, and various types of credit risk). Banks may issue gold certificates for gold which is allocated (non-fungible) or unallocated (fungible or pooled). Unallocated gold certificates are a form of fractional reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuing bank's gold on deposit. Allocated gold certificates should be correlated with specific numbered bars, although it is difficult to determine whether a bank is improperly allocating a single bar to more than one party. The first paper bank notes were gold certificates. They were first issued in the 17th century when they were used by goldsmiths in England and The Netherlands for customers who kept deposits of gold bullion in their vault for safe-keeping. Two centuries later, the gold certificates began being issued in the United States when the US Treasury issued such certificates that could be exchanged for gold. The United States Government first authorized the use of the gold certificates in 1863. In the early 1930s the US Government restricted the private gold ownership in the United States and therefore, the gold certificates stopped circulating as money. Nowadays, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany and Switzerland.

Accounts
Many types of gold "accounts" are available. Different accounts impose varying types of intermediation between the client and their gold. One of the most important differences between accounts is whether the gold is held on an allocated (non-fungible) or unallocated (fungible) basis. Another major difference is the strength of the account holder's claim on the gold, in the event that the account administrator faces gold-denominated liabilities (due to a short or naked short position in gold for example), asset forfeiture, or bankruptcy. Many banks offer gold accounts where gold can be instantly bought or sold just like any foreign currency on a fractional reserve (non-allocated, fungible) basis. Swiss banks offer similar service on an allocated (non-fungible) basis. Pool accounts, such as those offered by Kitco, facilitate highly liquid but unallocated claims on gold owned by the company. Digital gold currency systems operate like pool accounts and additionally allow the direct transfer of fungible gold between members of the service. Bullion Vault and Anglo Far-East allow clients to create a bailment on allocated (no fungible) gold, which becomes the legal property of the buyer.
Derivatives, CFDs and spread betting

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 the U.S., gold futures are primarily traded on the New York Commodities Exchange (COMEX) and Euronext. liffe. In India, gold futures are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX). As of 2009, holders of COMEX gold futures have experienced problems taking delivery of their metal. Along with chronic delivery delays, some investors have received delivery of bars not matching their contract in serial number and weight. The delays cannot be easily explained by slow warehouse movements, as the daily reports of these movements show little activity. Because of these problems, there are concerns that COMEX may not have the gold inventory to back its existing warehouse receipts. Firms such as Cantor Index, CMC Markets, IG Index and City Index, all from the UK, provide contract for difference (CFD) or spread bets on the price of gold.

Mining companies
These do not represent gold at all, but rather are shares in gold mining companies. If the gold price rises, the profits of the gold mining company could be expected to rise and as a result the share price may rise. However, there are many factors to take into account and it is not always the case that a share price will rise when the gold price increases. Mines are commercial enterprises and subject to problems such as flooding, subsidence and structural failure, as well as mismanagement, theft and corruption. Such factors can lower the share prices of mining companies. The price of gold bullion is volatile, but unhedged gold shares and funds are regarded as even higher risk and even more volatile. This additional volatility is due to the inherent leverage in the mining sector. For example, if you own a share in a gold mine where the costs of production are $300 per ounce and the price of gold is $600, the mine's profit margin will be $300. A 10% increase in the gold price to $660 per ounce will push that margin up to $360, which represents a 20% increase in the mine's profitability, and potentially a 20% increase in the share price. Furthermore, at higher prices, more ounces of gold become economically viable to mines, enabling companies to add to their reserves. Conversely, share movements also amplify falls in the gold price. For example, a 10% fall in the gold price to $540 will decrease that margin to $240, which represents a 20% fall in the mine's profitability, and potentially a 20% decrease in the share price. To reduce this volatility, some gold mining companies hedge the gold price up to 18 months in advance. This provides the mining company and investors with less exposure to short term gold price fluctuations, but reduces returns when the gold price is rising.
1.13 Supply of gold in India
Authority Bank /Agencies
Bullion Dealer (Large)
Bullion Dealer (Small)
Jeweller
Jeweller
Consumer
Consumer
Consumer

1.14 India and Gold Gold has always been considered a sacred (holy) item in the Hindu way of life and is a must in every religious function. The explanation being that gold is pure having passed through fire in its process of evolution. Over centuries and millennia, gold has become an inseparable part of the Indian society and fused into the psyche of an Indian. Indians see the metal as a symbol of purity, prosperity and good fortune. Indian gold consumption was 630 metric tons in 2004. India is the world's largest gold importer and uses 99% of its total gold availability for Gold Jewelry making. "India's gold consumption was touch 700 tons in 2005. Buying Gold Jewelry is considered auspicious in Akha Teej ( 'Akshaya Tritiya') . 70% of the population lives in rural India where agriculture is the main activity. 65-70% of the gold purchase is done in the rural areas, which is largely dependent on agriculture . A good year for agriculture assures higher demand for gold. The figures of the past few years show that Indian demand for gold has consistently been hovering around 25% of total world demand as the following table shows:
As per June 2006 views India has officially been named the world's largest gold jewellery producer, consigning Italy to second place.

China occupied the third spot in the league, producing 198 tonnes of gold jewellery, and Turkey took fourth place, producing 197 tonnes. India is the largest consumer of gold in the world followed by China and Japan. India is emerging as worlds largest trading centre of gold with a target of US$16 bn set for 2010. India dominates the worlds cut and polished diamonds (CPD) market. In value terms, the country accounts for approximately 55% of global polished diamond market and nearly 9% of the jewelry market. Surat contributes 90% of Indias total diamond exports. Indias domestics branded jewelry market is estimated at Rs 600-700 crores. There are 13 bullion importing bank in India. Indias gem and Jewelry Exports Promotion Council (GJEPC) is aiming at turning India into an international diamond trading centre. Since India is already enjoying 80-85% of the world CPD market, scope for further growth in diamond exports is limited. Hence, if Indias gems and jewelry sector is to substantially increase exports, the best lies in the jeweler sub sector. Indias imports an average of 18000 bars a day, about 70% of the total demand and the balance is being sourced to indigenous output and metal recycled from old jewelries. The main reason why India has not made a dent in jeweler exports market is the existence of government restrictions in their domestic jewelry industry in the pre-economic liberalization era. If the gold jewelry exports are to be encouraged, it would be necessary to allow bulk imports of gold which would have to be converted to jewelry and then exported. Gold Investment in India The History
Until 1990, the Gold Control Act forbade the private holding of gold bars in India. There was physical investment in smuggled ten tola bars, but it was limited and often amounted to keeping a few bars ready to be made into jewellery for a family wedding. Gold investment essentially was in 22 carat jewellery. Since 1990, investment in small bars, both imported ten tolas and locally-made small bars, which have proliferated from local refineries, has increased substantially. GFMS estimate that investment has exceeded 100 tonnes (3.2 million oz) in some years, although it is hard to segregate true investment from stocks held by the 16,000 or more gold dealers spread across India. Certainly gold has been used to conceal wealth, especially during the mid-1990s, Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 20

when the local rupee price increased steadily. It was also augmented in 1998 when over 40 tonnes (1.3 million oz) of gold from bonds originally issued by the Reserve Bank of India were restituted to the public. In the cities, however, gold is having to compete with the stock market, investment in internet industries, and a wide range of consumer goods. In the rural areas 22 carat jewellery remains the basic investment. The Gold Deposit Scheme The government announced a new initiative in its 1999/2000 budget to tap the hoard of private gold in India by permitting commercial banks to take gold deposits of bars, coins or jewellery against payment of interest. Interest levels can be set by each bank, and deposits must be for three to seven years. Interest and any capital gains on the gold will be exempt from tax. The banks can lend the gold to local fabricators or sell it in the Indian market or to local banks. However, the depositor has to declare the origin of the gold, so that metal bought illegally to hide wealth cannot be deposited. The State Bank of India was the first to accept deposits. To date, the amount of gold collected under this scheme (less than 10 tonnes or 0.32 million oz) has fallen well short of the 100 tonnes (3.2 million oz) that was mentioned when it was launched. Evolution of Modern Gold Market in India The introduction of a modern gold market in India: 1990 Abolition of the long-standing Gold Control Act, which had forbidden the holding of primary or bar gold except by authorised dealers and goldsmiths and sought to limit jewellery holdings of families. Imports were then permitted in following three stages: 1. 1992: Non-Resident Indians (NRIs) on a visit to India were each allowed to bring in up to 5 kilos (160.7 oz) on payment of a small duty of six per cent. This allocation was raised to 10 kilos in 1997. 2. 1994: Gold dealers could bid for a Special Import Licence (SIL) which was issued for a variety of luxury imports. 3. 1997: Open General Licence (OGL) was introduced, paving the way for substantial direct imports by local banks from the international market, thus partly eliminating the regional supplies from Dubai, Singapore and Hong Kong. The OGL system has also largely eclipsed imports by NRIs and SILs. Additionally, significant temporary imports are permitted under an Export Replenishment scheme for jewellery manufacturers working for export in designated special zones. Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 21

til 1990, the Gold Control Act forbade the private holding of gold bars in India. There was physical investment in smuggled ten tola bars, but it was limited and often amounted to keeping a few bars ready to be made into jewellery for a family wedding. Gold investment essentially was in 22 carat jewellery. Since 1990, investment in small bars, both imported ten tolas and locally-made small bars, which have proliferated from local refineries, has increased substantially. GFMS estimate that investment has exceeded 100 tonnes (3.2 million oz) in some years, although it is hard to segregate true investment from stocks held by the 16,000 or more gold dealers spread across India. Certainly gold has been used to conceal wealth, especially during the mid-1990s, when the local rupee price increased steadily. It was also augmented in 1998 when over 40 tonnes (1.3 million oz) of gold from bonds originally issued by the Reserve Bank of India were restituted to the public. In the cities, however, gold is having to compete with the stock market, investment in internet industries, and a wide range of consumer goods. In the rural areas 22 carat jewellery remains the basic investment. The Gold Deposit Scheme The government announced a new initiative in its 1999/2000 budget to tap the hoard of private gold in India by permitting commercial banks to take gold deposits of bars, coins or jewellery against payment of interest. Interest levels can be set by each bank, and deposits must be for three to seven years. Interest and any capital gains on the gold will be exempt from tax. The banks can lend the gold to local fabricators or sell it in the Indian market or to local banks. However, the depositor has to declare the origin of the gold, so that metal bought illegally to hide wealth cannot be deposited. The State Bank of India was the first to accept deposits. To date, the amount of gold collected under this scheme (less than 10 tonnes or 0.32 million oz) has fallen well short of the 100 tonnes (3.2 million oz) that was mentioned when it was launched. Evolution of Modern Gold Market in India The introduction of a modern gold market in India: 1990 Abolition of the long-standing Gold Control Act, which had forbidden the holding of primary or bar gold except by authorised dealers and goldsmiths and sought to limit jewellery holdings of families. Imports were then permitted in following three stages:

1. 1992: Non-Resident Indians (NRIs) on a visit to India were each allowed to bring in up to 5 kilos (160.7 oz) on payment of a small duty of six per cent. This allocation was raised to 10 kilos in 1997. 2. 1994: Gold dealers could bid for a Special Import Licence (SIL) which was issued for a variety of luxury imports. 3. 1997: Open General Licence (OGL) was introduced, paving the way for substantial direct imports by local banks from the international market, thus partly eliminating the regional supplies from Dubai, Singapore and Hong Kong. The OGL system has also largely eclipsed imports by NRIs and SILs. Additionally, significant temporary imports are permitted under an Export Replenishment scheme for jewellery manufacturers working for export in designated special zones.
1.15 Price records
1.16 Investment strategies Fundamental analysis Investors using fundamental analysis analyze the macroeconomic situation, which includes international economic indicators, such as GDP growth rates, inflation, interest rates, productivity and energy prices. They would also analyze the yearly global gold supply versus demand. Over 2005 the World Gold Council estimated yearly global gold supply to be 3,859 tonnes and demand to be 3,754 tonnes, giving a surplus of 105 tonnes. While gold production is unlikely to change in the near future, supply and demand due to private ownership is highly liquid and subject to rapid changes. This makes gold very different from almost every other Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 23

commodity. Identifiable investment demand for gold, which includes gold exchange-traded funds, bars and coins, was up 64 percent in 2008 over the year before.
Gold versus stocks In the last century, major economic crises (such as the Great Depression, World War II, the first and second oil crisis) lowered the Dow/gold ratio, an indicator of how bad a recession is and whether the outlook is deteriorating or improving, to a value well below 4. The ratio fell on February 18, 2009 to below 8.During these difficult times, many investors tried to preserve their assets by investing in precious metals, most notably gold and silver. The performance of gold bullion is often compared to stocks due to their fundamental differences. Gold is regarded by some as a store of value (without growth) whereas stocks are regarded as a return on value (i.e., growth from anticipated real price increase plus dividends). Stocks and bonds perform best in a stable political climate with strong property rights and little turmoil. The attached graph shows the value of Dow Jones Industrial Average divided by the price of an ounce of gold. Since 1800, stocks have consistently gained value in comparison to gold in part because of the stability of the American political system. This appreciation has been cyclical with long periods of stock outperformance followed by long periods of gold outperformance. The Dow Industrials bottomed out a ratio of 1:1 with gold during 1980 (the end of the 1970s bear market) and proceeded to post gains throughout the 1980s and 1990s. The gold price peak of 1980 also coincided with the Soviet Union's invasion of Afghanistan and the threat of the global expansion of communism. The ratio peaked on January 14, 2000 a value of 41.3 and has fallen sharply since. On November 30, 2005, Rick Munarriz of The Motley Fool posed the question of which represented a better investment: a share of Google or an ounce of gold. The specific comparison between these two very different investments seems to have captured the imagination of many in the investment community and is serving to crystallize the broader debate.
Technical analysis As with stocks, gold investors may base their investment decision partly on, or solely on, technical analysis. Typically, this involves analyzing chart patterns, moving averages, market trends and/or the economic cycle in order to speculate on the future price.
Using leverage Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 24

Bullish investors may choose to leverage their position by borrowing money against their existing assets and then purchasing gold on account with the loaned funds. Leverage is also an integral part of buying gold derivatives and unhedged gold mining company shares (see gold mining companies). Leverage or derivatives may increase investment gains but also increases the corresponding risk of capital loss if/when the trend reverses.
1.17 Purity Norms In case of physical Gold problems related to purity arises there .Purity includes Caret system, Registered with proper authorities such as Hallmarking, BIS etc. Hallmark has been acting as a safeguard to purchasers of gold and gold articles for centuries in various countries. In simple terms, Hallmark is a purity certification of gold articles in accordance with Indian Standard specifications. Gold articles are evaluated and tested at an official Assaying and Hallmarking Centre and then certified that the metal used conforms to the national and international standard of fineness and purity. Percent Gold 100% 91.7% 75.0% 58.5% 41.6% = = = = = = European System 1000Fine 917 Fine 750 Fine 585 Fine 416 Fine = = = = = = Karat System 24 Karat 22 Karat 18 Karat 14 Karat 10 Karat
1.18 WEIGHT EQUIVALENTS 1 troy ounce 1 troy ounce 1 troy ounce 1000 troy ounces 1 gram 1 kilogram 1 tonne 1,097 ordinary ounces 480 grains 31.1 grams 31.3 kilograms .03215 troy ounces 32.15 troy ounces 32.150 troy ounces

1 ordinary ounce 1 ordinary pound .9115 troy ounces 14.58 troy ounces
1.19 Comparison-Various Forms of Gold Parameters Mode Safety/ Storage Purity of Gold Pricing Transparent. Low on cost. Cant Say High Mark up 99.5 % or higher Cant Say High on Purity Gold ETF Demat No risk of theft Jeweller Jewellery / Bar/ Coins High Risk Banks Bar / Coins High Risk
Liquidity
On business days on the Exchange
Relatively at High Cost
Low on Liquidity
Denomination 1 unit (1 gram of Gold)
Customized
Pre-define
1.20 Physical Gold vs. Gold Mining Shares The difference is Risk. Gold Mining Shares will come with higher risk compared to investments in physical gold Gold mining share is not gold. Its a company stock first and then secondly can be construed as Gold A Gold Mining Share is NOT a substitute for physical Gold. It represents a benefit in the future from potential Gold deposits in the ground and not the actual Gold itself Physical Gold ownership has protected investors during periods of economic depression, wars and political unrest. Mining stocks could be negatively affected in such times as stock markets may be closed or adversely affected for a period of time
1.21 Risks of Gold Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 26

1. Physical Risks of Gold
2. Gold Exchange Risk 3. Volatility 4. Political 5. Gold Scams 1. Physical Risk of Gold The first downside of gold investment is the physical risk. Buying gold bars and coins exposes the investor to the risk of loss and theft. Costs are involved to mitigate this risk. The transport of gold needs to be insured, gold has to be kept in a personal safe at home, or, better, in the banks safety deposit box. Here, renting fees incur. Besides safety boxes and personal safes at home, some people bury their gold on their property (midnight gardening). Will this reduce the risk of physical gold? In some ways yes, as it reduces the likelihoods of theft. However, those people should make damn sure to not forget to dig out the gold when they move, or before they die. Also, if the gold is immediately needed, its probably not possible to secretly access it. 2. Exchange Risks of Gold Trading Exchange risks refer to the exchanges where gold and futures are traded, and not to currency risks. The major gold futures exchange is MCX. Trading at these and all other exchanges is subject to their rules and regulations. The exchanges can on purpose or accidentally foster market outcomes by changing their trading rules. What events could happen at an exchange? Margin Requirement Change Policy: Liquidation only Halt trading 3. Volatility of Gold The price of gold, as of every traded asset, is subject to the ups and downs of the market. The rate of this precious metal can fluctuate fundamentally. The volatility of gold must be a concern to all short- and long-term investors. (See the 6-month gold chart. The pattern looks quite unpredictable, doesnt it?)
Its perceived value is shaped by demand and supply. The factors are gold production by gold mines, central banks, investors and the industry (jewelry, electronic etc.). The volatility of gold is a market risk. Another risk of this category is the liquidity risk. This occurs in thinly traded markets, where sellers have difficulties in finding willing buyers. Futures of not actively traded contracts might run into this risk. Shares of small stock mines might also face liquidity problems. 4. Political Risks of Gold Investing The political risk of gold investing means that the government can change laws and regulations that may harm your investment in gold. These government interventions can happen in the country of the investor or in another country. Both would have an impact on the gold price, as supply and demand, or the invisible hand of the market will be disturbed. Prohibition of gold ownership Nationalization of gold mines Fixed gold price How to anticipate and circumvent these government risks? First, an investment in gold mines should occur only in stable countries, such as Canada and Australia (unless high risk investments are desired). Second, it might be wise to distribute personal gold reserves to several countries, in case of confiscation. Third, investors should always be well-informed about world news which can influence the gold price. 5. Gold Scams A gold scam is either 1. downright fraud, 2. misrepresentation or 3. market manipulation. To be knowledgeable about gold scams is necessary to anticipate and avoid them.

Chapter2 Research methodology Index
2.1Introduction 2.2 Research Problem 2.3 Aims and objectives of study: 2.4 Research methodology: 2.5 Research Design: 2.6 Data source: 2.7 Tools for data Collection: 2.8 Sample Design: 2.9 Research Procedure: 2.10 Sampling Technique: 2.11 Utility of the Research: 2.12 Limitation of Study:

Chapter 2 Research Methodology 2.1Introduction Research is the organized way of collecting facts and analyzing them in the form of numerical data relevant to formulating problem and thus arriving at a certain conclusion over problem based on the collected data. Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. Research Methodology has many dimensions and research methods do constitute a part of research methodology. When talk of research methodology researcher not only talk of research methods but also consider the logic behind the methods we used in the context of our research study and explain why we are using a particular method or technique so that research results are capable of being valuated. What data have been collected and what particular methods has been adopted, why particular technique of analyzing data has been use, which technique has been suitable to carried out the research and a similar other questions are usually answered when we talk of research methodology concerning a research study. In short Research is a systematic and continues method of defining a problem, collecting the facts and analyzing them, reaching conclusion forming generalizations. In this research study have find out needs of marketer to develop the products (brands) or services to meet the consumer buying and consumption behaviour which affecting their organization. 2.2 Research Problem Press release: Bangalore, 31March 2011
Gold demand in India to continue to grow in the next decade, strengthening its position as the heart of the global gold market The research problem is that there are so many investment avenues available in the market; however it should be selected on the basis of return yield from it. Though rates of gold are rising day by day but still its demand is not showing decline trend. Is it happening so because of performance of gold in unexpected way? So research problem is concerned with the preference given to gold as an investment option and its effect on investment in other avenues and ancillary requirements of the Gold-purity norms, investors perception.

2.3 Aims and objectives of study: In present globalized world, various investment avenues are present. But to select from them is a great deal. Suitability of investment avenues depends on various requirements of the investor. So in order to check the feasibility of Gold as investment option following objectives are framed. The objectives of the research are to be carried out as given below. 1) To study the Pricing policy of gold ornaments. 2) To test the GOLD by comparing it with other securities on various parameters. 3) To study the norms of rating the purity and study its quality based on various types. 4) To study buying pattern of gold in AMRAVATI by middle class people (as an investment or as a need) 5) To study the effect of gold market on other investment options.
2.4 Research methodology: Research methodology is the process to carry out the research. It starts with review of literature & problem formulation and ends with some conclusion and suggestions. The research methodology will be carry out by collecting information or data.
2.5 Research Design: The researcher has to state the conceptual structure of research design within which research is conducted. Here researcher had used Descriptive type of research design. Descriptive research is the description of the state of affairs as it exists at present. It includes surveys and fact-finding enquiries of different kinds. In order to achieve the mentioned objectives, Descriptive research design was very much suitable hence selected.
2.6 Data source: Primary Data: Primary data are those, which are collected a fresh and for the first time. Primary data is collected through questionnaires, formal and informal interview of Goldsmiths, MCX traders and dealers. Secondary Data:

Secondary data are those which have already been collected by someone else and which have passed through the statistical process. Secondary Data is collected through books, Journals, Magazines, websites etc. 2.7 Tools for data Collection: Research tools such as questionnaires, meets, formal and informal interviews of Goldsmiths, MCX traders and dealers are used.
2.8 Sample Design: Universe: The universe of the study is Amravati city.
Sample unit: The sample unit of the study is middle class people in Amravati city.
Sample Size: The sample size chosen is 100 samples.
2.9 Research Procedure:
Understand and study the plans and Formulating the objective of the study.
Designing the methods of data collection.
Select the sample.
Systemtic collection of data for research .
Analyze the collected data for detecting the gaps, deficiencies & areas of improvement
Reporting the finding
Develop recommendations based on the findings.
Report Writing
2.10 Sampling Technique: The technique that is used Convenience Sampling Techniques.

A convenience sample is that where the samples are selected, in part or in whole, as per convenience of the researcher. The researcher makes no attempt, or only a limited attempt, to insure that this sample is an accurate representation of some larger group or population. The classic example of a convenience sample is standing at a shopping mall and selecting shoppers as they walk by to fill out a survey.
2.11 Utility of the Research: The study is carried out to inform the investors or to make them aware about the pricing policy and purity norms to make proper decisions for purchasing gold or while making investment in gold. Also study will be helpful to financial advisors, Goldsmiths to analyze the investors and frame the policies according to it. 2.12 Limitation of Study: Applicability of the results of this research will be applicable only to Amravati city so it may or may not be applicable to other parts of nation.

Chapter3 3.1 Pricing policy of Gold 3.2 Hallmarking Of Gold Jewellery in India 3.3 Indian Scenario 3.4 Hallmarking- Certification of Gold 3.5 Comparison of Gold with various Assets 3.6 Cost efficient ways of investment in gold internationally 2.7 Classification of Respondents on the basis of their personal information 3.8 Direct Comparison 3.9 Ranking of the securities 3.10 Comparison with other securities

Chapter 3 Data Interpretation 3.1 Pricing policy of Gold Consider the Ornament of 10Gram in Weight and Rs2800/Gram for 24KGold 22K Percentage for Fineness Composition: Gold Copper Silver 91.6% 7.0% 1.4% 95.8% 3.5% 0.7% 100% --91.6% 23K 95.8% 24K 100%
Price for 10 Grams
25,670
26,830
28,000
Selling Price (Non KDM) Metal Cost +Making Charges (60Rs/Gm) Selling Price 26,270 27,430 28,600 25,670 600 26,830 600 28,000 600
Selling Price (KDM) Metal Cost +Making Charges (150Rs/Gm) Selling Price 27,170 28,330 29,500 25,670 1,500 26,830 1,500 28,000 1,500
Costing in case for sale by customer 22K Percentage for Fineness Metal -Other Metal Mixed(Batta) Gold Remains Price for 10 Grams Buy Back Price 91.6% 10Gr 0.840Gr 9.16Gr 25,670 23,514 23K 95.8% 10Gr 0.420Gr 9.58Gr 26,830 25,703 24K 100% 10Gr -10Gr 28,000 28,000

3.2 Hallmarking Of Gold Jewellery in India Culturally, the Indian people have a great fascination for gold. It should be recognized that in India, in common with other Asian Countries, gold has a very important role in our cultural heritage. Gold is considered as a commodity, and not a product. Any form of gold is equal to any other form of gold. It is viewed to be homogenous and indistinguishable, having no brand or expiry date. As a result, gold demand is not price-elastic. Rather it is prosperity elastic that is, increments in household income are generally matched by purchases of more gold. Unless alloyed with a comparatively small proportion of some other metal, both pure gold and pure silver are too soft to withstand wear as an article for use or adornment. This necessity has always demanded some system of control if frauds on the public are to be prevented, because adulteration of articles manufactured from the precious metals by the introduction of too much of the strengthening alloy is a type of fraud to which the public is extremely vulnerable. It is easy to perpetrate, because with both metals a considerable excess of alloy can be introduced without changing the colour, and is difficult to detect without technical tests.
3.3 Indian Scenario The annual consumption of gold which was estimated at 65 tonnes in 1982, has increased to over 500 tonnes presently about 80% is for jewellery fabrication (mainly over 22 carat purity) Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 36

for domestic demand, 15% for investor demand and barely 5% for industrial use. The remarkable feature is the way investment in jewellery has come to dominate the market. Urban demand is for adornment jewellery rather than on investment jewellery but in rural areas gold's role is that of an informal barter economy. Here, gold remains a retail cottage industry, and therefore, it can still be said to be performing a monetary role. It barters the economy of the agricultural community which accounts for 70% of all gold consumption in India. In the near future, therefore, the annual demand will continue to be over 500 tonnes, growing at the rate of around 4% in tandem with anticipated growth in per capita real income. It is estimated that there are 100,000 manufacturing units throughout India mostly employing up to 10 workers, although, there are above 100 large mechanized factories employing up to several hundred workers. There is an abundance of cheap skilled labour. Because the traditional jewellery is almost totally hand-made, the workforce is large and totals about 2 million. Many of these artisans have been trained in jewellery making skills from the age of 10 years and they lack formal education. Many manufacturers and retailers sub-contract work out to small workshops and this makes gold stock control and caratage quality control difficult to achieve. Indian consumer is very often a victim of irregular metal quality. A buyer, for instance, will be told that he has bought gold of 22 carats. When he goes to sell or exchange it he discovers that the gold is actually only of 18 carats or many customers have lost money in this way. In India the emphasis is on high caratage jewellery, and problems have also arisen through the lack of suitable high carat solders. The traditional handcrafted pieces in 22 carat contain many soldered joints and the use of solder alloys of a much lower caratage has meant a serious level of under-carating. The oldest types of fraud are those of adulteration by the addition of too much alloy, and the similar fraud of selling, as of gold or silver, articles externally of standard fineness but with base metal cores. These frauds continued till Hallmarking Scheme was launched by BIS. The handcrafted jewellery is made using traditional tolls and working practices. Melting and alloying is done using charcoal or coke-fired furnaces. Soldering operations are done using a mouth blowpipe with a candle or oil flame. Many small workshops buy scrap which they sometimes re-use without refining, while other refine it themselves using old and crude technology. Larger factories are equipped with modern electric melting units, investment casting facilities and machinery with their own modern refineries and producing gold either to 999 fineness Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 37

via electrolytic refining as the final step or to 995 minimum fineness by conventional methods.
3.4 Hallmarking- Certification of Gold Government of India took the cognizance and understood the necessity of protecting the public in its purchases of gold jewellery specially with regard to standards of fineness and the prevention of adulteration, be it deliberate or accidental. The principle objectives of the Hallmarking Scheme are to protect the public against the fraud of adulteration and to oblige manufacturers to maintain legal standards of fineness. Hallmarking is the accurate determination and official recording of the proportionate content of precious metal in gold. Hallmarks are thus official marks used in many countries as a guarantee of purity or fineness of gold jewellery. Taking cognizance of these aspects the RBI Standing Committee on Gold and Precious Metals opined that introduction of a Hallmarking System would not only protect the public from fraud, but also assist exports of jewellery. While agreeing on this the Committee reckoned that compulsory certification of gold would not be implementable on account of the massive structure of trade. Recommending the pursuance of a voluntary scheme, it emphasized the deviations in purity of fine metal should invoke penalties under legislation and BIS was named as the sole agency in the country for Hallmarking of gold jewellery under the provisions of the BIS Act, 1986. BIS, as the National Standards Body of India is primarily engaged in the preparation and promotion of standards and operation of different quality certification schemes. In this context, the BIS Precious Metals Sectional Committee (MTD 10) has formulated and published the following Indian Standards on Gold and Gold Alloys: a) IS 1417 Grades of gold and gold alloys, Jewellery/Artefacts-Fineness and Marking b) IS 1418 Assaying of Gold in Gold Bullion, Gold alloys and Gold Jewellery/ Artefacts Cupellation (Fire Assay Method) c) IS 2790 Guidelines for manufacture of 23,22,21,18,14 and 9 carat gold alloys d) IS 3095 Gold Solders for use in manufacture of Jewellery Hallmark has been acting as a safeguard to purchasers of gold and gold articles for centuries in various countries. In simple terms, Hallmark is a purity certification of gold articles in accordance with Indian Standard specifications.

The Bureau of Indian Standards, the countrys apex standards body, is involved in the development of technical standards (popularly known as Indian Standards), product quality and management system certifications and consumer affairs in all matters concerning standardization, certification and quality. The BIS hallmarking scheme has been aligned with international criteria on hallmarking (Vienna Convention 1972). As per this scheme, licence is granted to the jewelers by BIS under Product Certification Scheme. The BIS certified jewelers can get their jewellery hallmarked from any of the BIS recognized Assaying and Hallmarking Centre. Hallmark consists of five components i.e. BIS Mark, the fineness number (corresponding to given caratage), Assaying and Hallmarking Centre's mark, jewelers mark and year of marking denoted by a code letter and decided by BIS (e.g. code letter 'A' was approved by BIS for year 2000, 'B' being used for the year 2001 and 'C' for 2002). The marking is done either using punches or laser marking machine. The BIS hallmark, a mark of conformity widely accepted by the consumer, bestows the additional confidence to the consumer on the purity of gold jewellery. As per this scheme the jewellery retailer/manufacturer desirous of obtaining a licence apply to BIS for use of Standard Mark (hallmark) on their jewellery. After registration, BIS officials conduct a preliminary inspection for verification of premises
retailing/manufacturing, testing facilities and competence of testing personnel. A sample is drawn from the jewelers retail/manufacturing premises for independent testing. Based on the satisfactory preliminary inspection report and test report of the sample drawn during inspection, licence is granted to the jeweler. After getting the licence, the jeweler (retailer/manufacturer) has to follow a BIS approved scheme of testing and inspection on a continuing basis to have confidence in the homogeneity and purity of the gold jewellery offered for hallmarking. A BIS certified jewelers (retailer/manufacturers) has right to register himself with any of the BIS recognized Assaying and Hallmarking Centers to get his jewellery hallmarked. BIS maintains surveillance on the certified jewelers, at a defined periodicity. Market surveillance involves collection of hallmarked gold jewellery from licensee's retail outlet/manufacturing premises and having it tested for conformity in BIS recognized Hallmarking Centre. Deviations in degree of purity of fine metal and observance of operations not in conformance to the system may result in cancellation of BIS licence, and invoke legal proceedings for penalties under the BIS Act, Rules and Regulations. Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 39

The principal objective of assaying and hallmarking is to protect a consumer against victimization of irregular gold quality. Besides consumer satisfaction, hallmarking helps to create an export competitiveness of gold jewellery industry thus provide strong impetus for gold jewellery exports. In addition, it develops gold based financial products that will help in mopping up the vast dormant gold resources lying with the household sector. It also helps develop India as a leading gold market centre in the world commensurate with its status as the topmost consumer. The jewelers with BIS license of Hallmark Gold Jewellery provide clear indication of their capabilities, strong evidence of their commitment to quality, assurance of consistence in purity and quality of gold jewellery. It provides opportunity is to describe the way they maintain their standards for quality control and later demonstrate that they consistently do what they claim. It provides international competitiveness and enhanced customer satisfaction. It also provides third-party assurance and satisfaction that they have got the right purity of gold for the given price and protection against victimization of irregular gold quality purity.
3.5 Comparison of Gold with various Assets

Thought to be one of the first known metals, gold has been coveted throughout history for its beauty, scarcity, malleability, and uncanny resistance to rust and corrosion. Centuries ago, gold's unique combination of properties -- its sun-like colour, its soft hardness, and, especially, its imperviousness to decay and corruption -- imbued it with magical associations in the eyes of many. Because of these unique properties, gold has traditionally been the currency of choice for much of the world's population. The value of gold has transcended all national, political, and cultural borders, making it the ideal currency. Historically gold prices were determined by a combination of political and economical factors, till a universally acceptable concept of London and American gold price was institutionalised. An outcome of such initiatives was the Washington Agreement. However, in the past few years, the major factors impacting the gold price can be summarised as under Weak US dollar Growth in demand for jewellery Increase in demand for exchange-traded paper backed products Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 40

Demand for gold for the purpose of investment has outpaced the demand for the yellow metal for jewellery in 2004. Indians purchased 74.0 tonnes of gold for investment from January to September 2004, while it was 67.8 tonnes during the same period in 2003. While the advantages of having gold in an investor's portfolio has been talked about time and again, 'what should be the amount of investment' is always a question asked by the investors. There are two schools of thought on this subject. The recommendations are in the range of a 15% to 20% allocation of the total portfolio. 15% of the investment portfolio -- European Central Bank decision at the time of establishment in 1999 based on internal studies. 20% of the investment portfolio -- Based on a model done by Germmill & Hillman on 20 years data. Ideally, however, allocation to gold from an investment perspective should be based on comprehensive financial planning. It should always be remembered that investment in physical gold must always be in the form of coins/bars and should be in addition to the jewellery held by the household. Advantages of gold in a portfolio can be explained through the following points: Gold has a low to negative correlation with most other asset classes. An investment portfolio with an allocation to gold improves the consistency of portfolio performance during both stable and unstable periods.

The price of gold is not linked to the performance of economy, industry or companies. Gold offers the benefit of diversifying portfolio risks. 3.6 Cost efficient ways of investment in gold internationally Owning gold has been possible over the years in the form of mutual funds or stocks of gold mining companies. However, investors have been awaiting a more cost effective platform for owning gold. The World Gold council recognized this fact and launched the following ETF gold products across the world.
Gold Bullion Securities For the first time in history, gold was made available at the stock exchange just like an equity share to the investors through a World Gold Council initiated ETF product called Gold Bullion Securities. Each share of Gold Bullion Securities (GBS) is equal to 1/10th of an ounce of gold and is supported by physical holding of gold in the custody of HSBC. This is the first time ever that a metal has been listed on an international Stock Exchange and can be conveniently traded or invested by institutional investors as well as individuals. GBS is listed on the London Stock Exchange and also the Australian Stock Exchange. At present GBS is the most cost efficient way of investing in gold, as a potential investor has to only pay 0.3% p.a. as management fees, which includes the cost of storage and insurance apart from the 'brokerage' that they have to pay to the brokers.
Street TRACKS Gold Shares -- ETF Gold fund on NSE The first US exchange-traded fund that tracks the price of gold, called Street Tracks Gold Shares, was launched on the New York Stock Exchange in November 2004. This is the first ETF in the US that will track a commodity. It is designed to give investors the opportunity to invest in gold without requiring actual custody of the metal, which can be expensive. The ETF is expected to attract both institutional and individual investors who are looking for a hedge against inflation and currency exchange rates, or for diversification. It is sponsored by the World Gold Council and marketed by ETF provider State Street Global Markets. Each share will represent one-tenth of an ounce of gold bullion as priced by the London Bullion Market Association. The 2.3 million shares trade under the ticker symbol Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 42

'GLD.' Source: GFMS, World Gold Council Note * Based on GFMS data and estimatimation by the World Gold Council Jewellery 84,100 Private investment 31,400 Official holdings 29,000 Other fabrication 20,200 Unaccounted 3,600 Total: 168,300 tonnes *Based on GFMS data and estimations by the World Gold Council. Source: GFMS, World Gold Council
Jewellery Private investment Official holdings Other fabrication Unaccounted
Chart 1: Total above ground stocks of gold in tonnes as of 2010
2.7 Classification of Respondents on the basis of their personal information The data so collected from the respondents is classified and tabulated on the ground of profession, Income Class, their need for investment, on risk taking ability so on & so forth.

Profession wise Classification Profession No. of Respondent Businessmen 40 Professionals 21 Govt. Employees 10 Private Employees 13 Other 16
Other, 16 Businessmen, 40
Govt Employees, 10
Professionals, 21
Graph No. Profession wise Classification
From the above table, it is seen that, out of100 respondents, 40 respondents are Businessmen 21 respondents are Professionals, 10 &13 respondents are Government & Private Employeese.16 other respondents consists of Housewifes etc.
Income wise Classification Income Classes No. of Respondent 1Lakh-2Lakhs 25 2Lakhs-3Lakhs 47 3Lakh & above 28
GOLD: An Investment Option A Study Income Classes

50
No.of Respondents
40 30 20 10 0
No.of Respondents
1lakh2lakhs 25
2Lakhs3Lakhs 47
3Lakhs & Above 28
Graph No. Income wise Classification Among the Middle Class majority i.e. 47 of the Respondent falls under the income class of 2Lakhs-3Lakhs.However28 Respondent are from income class of 3Lakh & above and 25 Respondents are from income class of 1Lakh-2Lakhs. Classification on the basis of selection of investment Avenue Investment Avenues No. of Respondents 12 Equity Bonds/Deben ture 16 Life Insurance 59 80 Gold Fixed Deposits 58 Mutual Funds 17
Investment options Preferenced

80 70 60 50 40 30 20 10 0
No.of Respondents
Equity
No.of Respondents
12
Bonds/ Debent ure 16
LifeIns urance
59
Gold
FixedD eposits
58
MutulF unds
17
80

Graph No. Investment options Preference From the above Graph it is found that 80 Respondent prefer to invest in Gold with close competition as Life Insurance & FD at 59 & 58 respectively. Preference to Equity, by middle class is at its least i.e.just12 Respondent. Classification on the basis of need for investment Aim's for Investment No. of Respondents Saving Return 38 Both 14
48
Aim's for saving / return

No.of Respondents
60
40 20 0 Saving 48 Return 38 Both 14
No.of Respondents
Graph No. Aims for Investment It is seen that, Middle class invest basically to save for future rather than to earn return from it.48 respondent invest with the intention of saving, 38 respondent invest with the aim of earning returns there upon.14 respondent replied that both are necessary for them for any
investment avenue to be selected.
Classification on the basis of Degree of safety and return that is expected
Degree Saving return
1 3 2
2 4 1
3 20 4
4 52 23
5 21 70
Degree of expectectations
No.of Respondents 70 60
50
40 30 20 10 0
Degree Saving Degree return
1 3 2
2 4 1
3 20 4
4 52 23
5 21 70
Graph No. Degree of safety and return that is expected This graph is showing the degree for expectations from the investment. Some opted for higher saving while some opted for higher return. Degree of correlation is calculated. It is found to be+ 0.324 degree.
Classification on the basis of type of investment preferred
Type of investment No. of Respondents
Highly Risky 8
Moderate Risky 51
Low Risky 41
Type of investment
60 No.of Respondents
50
40
30
20
10
0
type of investment No.of Respondents
HighlyRisky
8
ModerateRis ky
51
LowRisky
41
Graph No. Type of investment This Graphs shows that Majority of the middle class people are Moderate risk taker or ignores taking high risk. Out of 100 respondents 51 are Moderate Risk bearer. While 41 is Low risk bearer. Just 8 respondents replied that they are good at bearing risk.
Classification on the basis of thinking about Gold as a Good investment option Responds No. of Respondents Yes 87 No 9 Cant Say 3 Not Replied 1
GOLD: An Investment Option A Study Judgement for Gold

90 80 70 60 50 40 30 20 10 0 No.of Respondents
No.of Respondents
Yes 87
No 9
Can't Say 3
Not Replied 1
Graph No. Thinking about Gold Looking at the Graph it is clear that 87 respondents are saying that yes Gold is good investment avenue. However 9 Opposed,3 were neutral &1 didnt replied. Classification on the basis of investment in Gold Invest in Gold No. of Respondents Yes 82 No 17 Not Replied 1
Invest in Gold
No.of Respondents 100 50
Yes 82
No 17
No.of Respondents
Not Replied 1
Graph No. Invest in Gold From above bars we observed that 82 respondents invest in Gold while 17 invests in securities other than Gold. However 1 respondent didnt reply for it. Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 49

Classification on the basis of frequency of investment in Gold Frequency No. of Respondents Frequently Occasionally (Festivals) 42 Marriages Once in an Year 17 Twice in an Year 17 Other
16
Frequency of investment in gold

45 40 35 30 25 20 15 10 5 0 No.of Respondents
Frequent ly 16
No.of Respondents
Occasio nally(Fe stivles) 42
Marriag es 9
Once in an Year 17
Twice in an Year 17
Other
Here Indian mentality is observed. Many of the respondents i.e.45 buy/invest in Gold at the time of festivals i.e. Diwali, Dashara etc.16 respondents manages to invest in Gold frequently.9 respondents replied that they wait for urgent situations such as Marriages for to buy it.17 respondents opted for once & twice in the year. Graph No. Frequency of investment in gold Classification on the basis of Forms of Investment Used for Investment in Gold Shares of Bank A/C 's / Forms of Bars Coins ETFs Ornaments Mining Co. Certificates Investment No. of Respondents 22 29 07 03 52 6

60 No.of Respondents 50 40 30 20
Forms of Investment
10
0 Bars Coins ETF's Shares of Mining Co. 3 Orname nts Bank A/C 's / Certific ates 6
No.of Respondents
22
29
52
Graph No. Ways of Investment in Gold Here, Ornaments are the most suitable way for to invest in Gold, 52 respondents replied for it. Bars & Coins are also used by many of the respondents. ETFs is new concept for the middle class. Only 7 replied for ETFs. Least i.e. only 3 replied for Shares of Mining Co. Classification on the basis of respondents aware about Purity Norms of Gold. Aware about checking Purity Norms of Gold No. of Respondents
Yes 86
No 05
Not Replied 09
Checks Purity of Gold

No.of Respondents 100 80 60 40 20 0 Yes 86 No 5 Not Replied 9
No.of Respondents
Graph No. Checking of Purity Norms of Gold Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 51

Classification on the basis of Purity Symbol known Fineness (Carats) 47
Purity Symbol No. of Respondents
Hallmark 70
BIS 12
Local Brands 02
Other 03
Purity Symbols
70 60 No.of Respondents 50 40 30 20 10 0 Hallma rk 70 BIS Finenes s(Carat s) 47 LocalB rands 2 Other
No.of Respondents
12
Graph No. Various Purity Symbols This Graph shows that many people are aware about the purity norms in Gold. However some respondents still have blind faith on the seller. So they need to be cautious for the fineness of the Gold and its quality. Classification on the basis of Recommendations to others for Gold Recommends No. of Respondents Yes 88 No 07 Not Replied 05
GOLD: An Investment Option A Study Recommends for gold

90 80 70 60 50 40 30 20 10 0
No.of Respondents
No.of Respondents
Yes 88
No 7
Not Replied 5
Graph No. Recommends for Gold Many respondents seems to be happy with investment in Gold. This can learn, as 88 respondents are recommending others also for the same. While 7 respondents didnt recommend it to others.5 were neutral at this step.

3.8 Direct Comparison
45
F.D. Gold,F.D. Gold
40
Lifeinsurance,F.D.,Mutual Funds Lifeinsurance,F.D.
35
Lifeinsurance,Gold,Mutual Funds Lifeinsurance,Gold,F.D.,Mutual Funds
30
Lifeinsurance,Gold,F.D. Lifeinsurance,Gold Lifeinsurance,Gold
25
Lifeinsurance Bonds/Debentures,F.D.
20
Bonds/Debentures,Gold Bonds/Debentures,Lifeinsurance,Gold,Mu tual Funds
15
Bonds/Debentures,Lifeinsurance,Gold,F.D . Bonds/Debentures Equity,Gold,F.D. Equity,Gold Equity,Lifeinsurance,F.D.,Mutual Funds
10
Equity,Lifeinsurance,Gold,Mutual Funds Equity,Lifeinsurance,Gold,F.D.
Equity,Bonds/Debentures,F.D. Equity,Bonds/Debentures,Lifeinsurance,G old,F.D.,Mutual Funds Equity,Bonds/Debentures,Lifeinsurance,G old
Graph No. Direct Comparison Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 54

From the pivot table, we got that, Businessmen are Good investors even in the case of Gold also they are leading. Govt. Employees are not good at the investment. However all the groups prefer to Gold though at different proportions. 3.9 Ranking of the securities The goal of this objective is to study consumer behavior regarding investment decisions, compare physical investment gold purchasing to other investment instruments, and to decide their upon Technique used here is the Weighted Average method to rank the securities. Formula used is ( ) ( )
Where W=Weight 1, 2, =Ranks Particulars

Gold Real estate Bank Deposits/FD's Debentures/Bonds Share Market Mutual Funds Life Insurance
Weighted Average(x)
123.13 112.73 112.40 108.27 107.67 106.20 106.07
Rank
1 2 3 4 5 6 7
Here, Ranks are calculated with the scientific manner and are practical in nature. Various parameters such as Return, Safety, Volatility, Liquidity and Convenience are considered for the ranking purpose. 3.10 Comparison with other securities Many of the Investment opportunities are available
Return Equity Bonds High Safety Low Volatility High Moderate Moderate Liquidity High Moderate Low Convenience Moderate High Low
Moderate High
Co.Debentures Moderate Moderate

Co. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds Moderate Low Low High Low Low Low Low Moderate High Moderate Low High Moderate Low High Low High Moderate High High Moderate High Low High
Moderate High Low High
Moderate High High High Moderate High
Chapter 4 Findings, Conclusion & Suggestions 4.1 Introduction 4.2 Findings 4.3 Conclusion 4.4 Suggestions

Chapter 4 Findings, Conclusion & Suggestions 4.1 Introduction While gold does fit within the definition of a commodity an economic good, which is valued and useful and has little or no difference in composition or quality regardless of the place of production its market dynamics and the sheer diversity of its application make it distinct from other commodities. Gold has a unique performance profile in terms of returns, volatility and correlation, and these characteristics combine to produce in gold a very different reaction to economic and financial variables relative to other commodities in periods of expansion and recession alike. Commodities other than gold can also be considered luxury goods or be used in technological applications. Some are basic goods used in everyday life, others are also used as inflation hedges or to protect against currency devaluation, and all of them in general provide some degree of diversification to an investors portfolio. However, gold can be regarded as different precisely because it performs all such functions. Over time, golds performance follows a different path from other commodities. Gold is under-valued, under-owned and under-appreciated. It is most assuredly not well understood by most investors. At the beginning of the 1970's when gold was about to undertake its historic move from $35 to $800 per ounce in the succeeding ten years, the same observations would have been valid. The only difference this time is that the fundamentals for gold are actually better. The research has given a much better understanding of consumer behavior regarding investment decisions, overview of the steps consumers go through before making the actual investment purchase, and shown where is currently physical golds position among other investment instruments by consumers minds. Research shows that the main motive to investing comes from the factor that more money is left over from other expenses and one wants to preserve its worth for the future in the situation where inflation is growing. For the most part investing is not natural way of life, but higher level prerogative, which comes after other needs are met. As more difficult economic period is expected, this means that investment decisions might be put forward. Investors go through a very long and thorough information search and evaluation period before making the investment decision. The survey shows that potential investors listen to almost all available sources regardless of how big role the source will play in the final decision. The longest period in investment process is spent on understanding options and analyzing the market. This means that consumer is exposed to Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 59

both positive and negative information. For example if he evaluates gold, he asks about it also from competitors (banks), who are usually not eager to recommend this. Research showed that one of the main issues why consumer decides not to invest is hardly attainable or hardly understandable information. It distinguished from the results that extensively large trust is put into investment specialists, especially if they are familiar to the investor. As investment is such a specific and yet individually important field, investors naturally trust experts more. Interesting was to see that survey results show quite noticeable trust towards investment seller compared to journalism. Perhaps this can be explained with the belief that investment sellers (banks) are more of experts in that field than journalists, even though journalist should be more objective. To better promote gold, author suggests to publish easily understandable honest information on investment gold. One sector of the information could be oriented to general education on gold as an investment. The other should target the latest developments. For example comments on the price movements. Published information should talk honestly about the risks involved and compare gold to other investment instruments, both in pluses and minuses. This disarms the competitors or other non-favouring voices, but also gives the audience a chance to make their own choices. One of the issues that could postpone or break the investment process (and also gold purchasing) is sudden price movements. People put investment decisions off when the price is shaking. It the price is increasing suddenly, investors feel as they have missed the right buying time and if it drops suddenly, they wait for the lowest place to buy or lose faith in the investment all together. Overall, sudden price drops are more discouraging than increases for the investors. This is proved by both this research and sales figures. This issue is more distinctive to regular investors and less to experts, who use the mass-investors psychological weaknesses to earn profit. To overcome this problem author suggests for investment gold specialist to communicate with the public when price decreases, why it does so. Explain the background which regular investors might not know and remind why gold is valuable investment in the long run. Research showed that gold is already known and valued by the people for its stable nature and long tradition. This is a great advantage during the current uncertain economic times where trust-based investment instruments lose ground. Trust-based investment instruments (like stocks and bonds) are used more for earning profit whereas gold is regarded as long-term stable backbone of the portfolio. All the interview respondents said that they plan to hold gold and buy more if possible. Before the research author believed that one of the biggest threats in owning physical investment gold is that it can be stolen as this is what people mostly point out as Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 60

golds minus in conversations. When this threat was compared next to trust-based investment instrument risks, it came out that they far exceed gold investors biggest fears. This example can be used if the same question comes up in the future gold conversations as people usually do not think of physical gold risks next to virtual investment risks
4.2 Findings Findings drawn from analysis of collected data and with the help of observation which experience at the data collected. Findings are the concrete that have support of the authentic data, which gives the answer to the question. All the decided objectives are achieved in the satisfactory manner through the findings in the study. 4.3 Conclusion Middle Class truly represents the Indian mentality. They postpone their present needs and save for future wellbeing. Businessmen are the much aware and are investing on the larger scale. Maximum respondents do invest in Life insurance and Fixed Deposits. Gold is seen in all the income classes i.e. lower to top middle class. It is founded that many people invest with the intention of saving rather than earning return on it. Middle class people are risk averse. They dont take risk beyond certain limits. Gold is found to be satisfying security among majority of them. The overall performances of Gold in all areas are satisfactory. During the study it was found that the following factors such as making charges, ornaments, quality provided etc has satisfactorily influenced consumer behavior. Further, there is some kind of promotion activities such as Seminars, Training sessions etc are required to hold the present customers and make new customers Many people expressed that Gold is good investment option, and are investing in it. People are investing according to their capacity, needs, mentality etc. Many ways are available through which we can invest in Gold. But most common way is Bars, Coins and Ornaments. Electronically Traded Products (ETPs) are not convenient among them. When we talk about the physical Gold, the question arises for Purity/Fineness. It was found that many people are aware about the quality and have knowledge but still they are blindly following the sellers for it. So here is much more scope for the further research. Various investment avenues were compared on the basis of different parameters. Here also it was

found that Gold stood on first place. As many people are satisfied with the Gold as an investment option, so they recommend others for the same.
4.4 Suggestions Government should take initiatives in making the procedure transparent of buying and selling of Gold. Unorganized or small Jewelers should be provided with proper assistance in case of membership registration of Gold with Hallmark (BIS). Good number of middle class people is investing in Gold in jewellery form so some Policies of jewellery formation should be made according to them. Brokers of MCX should organize the workshop for to educate the people and make them aware about Electronic Traded Funds.

Appendices
Questionnaire
Respondent, I am Mr. Pavan G. Walecha, The student of Department of Business Administration and Management SGB Amravati University, is conducting research under the title GOLD: An Investment Option-A Study for fulfillment of MBA Degree Course. I hope to get your valuable cooperation in this project. Thanking you. Yours Sincerely Pavan G. Walecha Name:-. Qualification:-.. Age:-. Profession:a) Businessmen Employees f) Private Employee Income Class: a) 1lacks-2Lacks 1) Where do you Invest? a) Equity d) Gold b) Bonds/Debentures e) Fixed Deposits c) Life Insurance f) Mutual Fund b) 2Lacks-3Lacks c) 3Lacks & Above b) Professional e) Others c) Government
2) You invest in the securities with the view of saving or earning return on them? a) Saving b) Returns
3) What is the degree of your expectations? Degree of Expectations 1 to 5 1 a) Savings Department of Business Administration and Management, Sant Gadge Baba Amravati University, Amravati Page 63 2 3 4 5

b) Return 4) In which Sort of Securities do you like to invest? a) Highly Risky b) Moderate Risky c) Low Risky
5) Do you think GOLD is a good investment option? a) Yes b) No c) Cant Say
6) Do you invest in Gold? a) Yes 7) How do you invest in Gold? a) Frequently d) Once in an year b) Occasionally (festivals) e) Twice in the year c) Marriages f) other b) No
8) In which forms do you invest in Gold? a) Bars b) Coins c) Exchange Traded Funds (ETPs) e) Ornaments f) Bank Accounts/Certificates d) Shares of Mining Companies
9) While purchasing a physical gold do you check the purity norms and rating of Gold? a) Yes b) No 10) Which purity symbol do you believe in? a) Hallmark d) Local Brands b) BIS c) Fineness (Carats)
e) Other.

11) Rate your Investment Options from 1 to 5
Where 1 is the WORST & 5 is the BEST

Share Market Gold Real Estate Debentures/ Bonds Mutual Funds Bank Deposits /F.Ds Life Insurance
Return Safety Volatility Liquidity Convenience Q 12) will you recommend others for investing in Gold a) Yes b) No

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GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

Source: Bloomberg. Data as on 31st Dec, 2009.

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

New Gold Discoveries

Financial & Economical Crises

New Gold Discoveries

Central Bank Reserves

Indian Wedding Season

Figure No. 1.11 Gold: As an Investment

Factors affecting Gold Prices

GOLD: An Investment Option A Study

Following are the ways to invest in the Gold:

Physical Form Bars Coins Jewellery

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

Non-Physical Form/Electronic form

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

Derivatives, CFDs and spread betting

GOLD: An Investment Option A Study

1.13 Supply of gold in India

Authority Bank /Agencies

Bullion Dealer (Large)

Bullion Dealer (Small)

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

1.15 Price records

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

On business days on the Exchange

Relatively at High Cost

Denomination 1 unit (1 gram of Gold)

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

Sample Size: The sample size chosen is 100 samples.

2.9 Research Procedure:

Designing the methods of data collection.

Select the sample.

Systemtic collection of data for research .

Reporting the finding

Develop recommendations based on the findings.

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

GOLD: An Investment Option A Study

Price for 10 Grams

GOLD: An Investment Option A Study