Gold.

Gold is traded as a commodity but primarily it is a monetary asset. It counts up to more than 65% of gold's total accumulated holdings when it comes to 'value for investment by central bank reserves, private players and high-carat jewelry. The remaining accumulated gold deposits are as a 'commodity' for jewelry in Western markets and usage in industry. It is a highly liquid market. It is argued that the real price of gold is should be driven by stock equilibrium rather than flow equilibrium due to large stocks of Gold as against its demand. Worlds largest gold producing country is South Africa with 394 tons in 2001. On the other hand, world's largest gold consuming country is India with an annual demand of 843.2 tones comprising of 26.2% of total world demands. Worlds gold demand is constantly increasing and it is nearing record levels at 4000 tons per year while the mine production is constant at 2250 tons per annum. It has been found out the total world gold production would decline about 30% over the next 7 years as the new discoveries in the major gold producing countries have become difficult, expensive and time consuming according to the studies done by The World Bank and Beacon Group. 2.History: Since ancient times, gold has always been an important asset and a value store. Gold was used as an exchange medium even before the Roman Empire existed. The gold was also used for currency by Chinese and Hindu cultures. This shows that the gold

was used not only by the western cultures but the eastern cultures also. Great Britain started the suit by adopting a gold-backed paper currency and the rest of the industrialized world followed this. The United States also started using gold in its currency and by the end of 1933; the United States Dollar was equal to 1/20th of an ounce of gold. Gold backed up the United States Dollar under an agreement known as the Bretton Woods agreement. Under this agreement, a specific value of gold tied the Dollar and also the other global currencies. This specific value was $35/oz of gold from 1934 to 1968. That made it illegal for the citizens of the US to own gold so that the level of gold and subsequently the value of dollar could be protected. When the Gold Standard was evocated, it became a popular investment medium, and it led to risen gold prices to $800/oz from $35/oz. Since then, no matter whatever happened, is it famines, floods or even world wars, golds importance as an investment medium hasnt changed at all.

Since 17th century, London has been the center of gold trading. It was because the gold was brought to London for refining and distribution purposes. Meanwhile, it began a method for disseminating the price of Gold known as the "Fix" in 1919 as the center of distribution. The price, at which the most buy and sell orders, of the members or Fixing Seat Holder's, matched, or balances, is known as the Fix. A large volume of physical

Gold can be bought or sold at a single, clearly posted price, the fix. The fix is a benchmark price for many transactions worldwide, whether for mines, fabricators or central banks, because it is undisputed prices at which all six of the largest Gold trading houses are willing do business.

3.Uses of gold: 1. Gold is an ancient metal of wealth, commerce and beauty, but it also has a number of unique properties that make it invaluable to industry. These properties include: Resistance to corrosion

 Electrical conductivity Ductility and malleability Infrared (heat) reflectivity Thermal conductivity 2.Golds superior electrical conductivity, malleability, and resistance to corrosion have made it vital in components used in a wide range of electronic products and equipment, including computers, telephones, cellular phones, and home appliances. 3. Gold has extraordinarily high reflective powers that are relied upon in the shielding that protects spacecrafts and satellites from solar radiation and in industrial and medical lasers that use gold-coated reflectors to focus light energy. 4. The demand for gold in industry is steady and growing. The supply of gold from stored inventory and from mining operations is limited and will remain so. Demand from investors who want to posses this precious metal is steady, and increases during periods of world crises or instability. 5. Gold is an excellent hedge against inflation, and protects earnings for the future. Modern investors can invest in gold the traditional way by purchasing gold bullion in the form of bars or coins or they can trade in gold or gold futures electronically, or by investing in gold mining or refining companies. 4.Trading: 1. The gold in the commodity market can be traded in four lots according to the capacity of the investor. There are four lot sizes of gold in the commodity market one lot size of gold is of 1 gram which is known as gold petal and other is of 8 gram which is known as gold guinea and one is of 100 gram which is known as gold mini and one

is of 1000 gram which is known as gold. Basically commodities are in lot and every lot consists of some units. 2. The volume of the gold in recent market is 51582. 3. The price is fluctuating in all commodities. Current market price of gold is 25242(closing price as on 08-08-2011).

Gold Has Current Expiry Of : 1. 5 October, 2011 2. 5 December, 2011 3. 4 February, 2012

Major Trading Centers Of Gold:

London (clearing house) New York (home of futures trading) Zurich (physical turntable) Istanbul, Dubai, Singapore and Hong Kong (doorways to important consuming regions)

Tokyo Mumbai (India's liberalized gold regime)

Hong Kong Gold Market, Zurich Gold Market, London Gold Market and New York Market are the 24-hour gold markets. In India, gold is traded in Mumbai and Ahmadabad. It is also traded in three of Indias major commodity exchanges namely National Commodity & Derivatives Exchange ltd, Multi Commodity Exchange of India ltd and National Multi Commodity Exchange of India ltd.

Why To Invest In Physical Gold? 1. Gold has always been, and will always be, the most legendary precious metal in the world. 2. Gold will always be in demand, and demand is increasing. 3. Gold is an inflation-proof investment.

4. Unlike paper currency, stocks and bonds, gold will never loses its intrinsic value. 5. Gold maintains its value through political and social upheavals, wars, and natural disasters. 6. A tangible and liquid asset, gold is the only truly international currency. 7. The current U.S. debt and trade crisis will continue to push gold prices up. 8. Physical (allocated) gold is the most secure way to invest in gold. 9. Gold should be part of every optimally diversified portfolio. 10.No other investment has the wealth preserving power of gold!

ETF Gold investment: In commodity market, gold is also trade in ETF that is exchange traded funds. The concept of ETF gold investment is explained below in detail. Until January 2008, the stock markets witnessed an almost secular bull run for nearly five years. That was the time when equity-linked investment avenues were favorites with investors. It took a sharp fall in equity markets for investors to look

beyond equities and consider other investment avenues. Since then, gold is an asset class that has attracted a lot of attention. The reasons for the same are not difficult to guess. From its peak in January 8, 2008, the BSE Sensex is down by nearly 54% till date. On the other hand, gold has appreciated by almost 25% over the same period. Expectedly, gold has caught the investors fancy. In this article, we discuss the Gold Exchange Traded Fund (Gold ETF) route of investing in gold.

Options For Investing In Gold: Not too long ago, buying physical gold was the only option for investing in gold. However, the launch of Gold ETFs threw open another option for investors. Gold ETFs are open-ended funds which track prices of gold. They are listed and traded on a stock exchange; hence, they can be bought and sold like stocks on a real-time basis. These funds are passively managed and they mirror domestic gold prices. By enabling investors to invest in gold without holding it in physical form, Gold ETFs offer a rather unique investment opportunity to investors.

Advantages of Gold ETFs Although the mode chosen for investing in gold would entirely depend on investors, Gold ETFs do offer some distinct advantages vis--vis investing in physical gold. 1. Convenience: Gold ETFs are a convenient means of investing in gold. Since there is no delivery involved, investors do not have to worry about the storage and security aspects that are typically associated with investing in physical gold.

2. Quality: As per SEBI regulations, the purity of underlying gold in Gold ETFs should be 0.995 fineness and above. This spares investors the trouble of finding a reliable source to buy gold. 3. No premium: Jewelers and banks generally sell gold at a premium. The premium can be in the range of 5%-10% (inclusive of making charges) in case of jewelers and up to 15% in case of banks. Since Gold ETFs are traded on the stock exchange, they can be bought at the prevailing market rate without paying any premium. 4. Low cost: To store physical gold, one would typically need a locker. This expense is over and above the premium paid at the time of buying physical gold. As for Gold ETFs, a pre-requisite is to have demat and trading accounts with a broker. To maintain these accounts, investors are required to pay annual charges, which vary from broker to broker. Investors also have to pay the brokerage on each trade. Finally, there are annual recurring charges which are charged to the fund. Considering the premium and other charges borne while buying physical gold, investing via Gold ETFs can turn out to be a more cost-effective option.

5. Transparent pricing: The pricing of physical gold varies depending on the vendor. Conversely, Gold ETFs have a transparent pricing mechanism. International gold prices are converted to Indian landed price using the applicable exchange rate. Various duties and taxes are also added to arrive at the landed price of gold. 6. Tax efficiency: In Gold ETFs, long-term capital gains tax is applicable after twelve months from the date of purchase vis--vis three years in the case of physical gold. Also, unlike physical gold, investments in Gold ETFs are not subject to Wealth Tax.

7. Resale value: Gold ETFs can be easily sold in the secondary market on a realtime basis (i.e. at the prevailing market price). Whereas, while selling physical gold, the jeweler will deduct making charges (the charge that is added while buying gold). As regards banks, they refuse to buy back gold. TAX Implications:Tax implications on Gold ETFs are same as those on debt mutual funds. A unit of a Gold ETF that is held for less than twelve months is treated as a short-term capital asset. Gains on the same are taxed at the investors marginal rate of tax. Units held for more than twelve months are treated as long-term capital assets. Long-term capital gains are taxed at 20% (after allowing for indexation benefit) or 10% (without indexation benefit), whichever is less. Criteria for selecting a Gold ETF Following are some of the factors that investors must consider before investing in a Gold ETF.

a. Percentage of holdings in physical gold Ideally, investors must select a Gold ETF that holds a significant portion of its portfolio in gold over ones that take cash calls i.e. invests in current assets. b. Expense Ratio Investors must choose a fund which has a lower expense ratio. Higher expenses translate into lower returns for investors.

Explanation: The graph above shown is of the gold expired contract of 5th August 2011(6th December2011-5th August2011).according to graph the fluctuation of gold was consistently upwards. From the start of the august contract gold broke 21000 level and slipped to 20,200 level within 20 days. After that it went to 23,000 which were around its resistance level, as gold went upwards from February it was consistently supports the price of gold and moving upwards.

In short in these 8 months gold was bullish and then it supported the price very well around its support level of above 20,000.