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Semelhante a Importance of Gold in Financial Markets.pptx
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Importance of Gold in Financial Markets.pptx
- 1. ● Prepared By: Vishesh Kumar Importance ofgoldin financialmarkets
- 3. Gold is a chemical element with the symbol Au derived from Latin: aurum. In a pure form, it is a bright, slightly reddish yellow, dense, soft, malleable and ductile metal. It is one of the least reactive chemical elements and is solid under normal conditions. Some Chemical Properties:- ● Melting point : 1064.18 °C ● Density : 19.32 g/cm3 ● Symbol : Au Whatisgold?
- 4. Purities ofgold In the physical market gold is available in different purities, depending on the uses. Let’s take a short look on them: ➔ 24 karat = 100% gold or Pure gold ➔ 22 karat = 91.7 % gold ➔ 18 karat = 75.0 % gold ➔ 14 karat = 58.3 % gold ➔ 10 karat = 41.7 % gold
- 5. ● Of all the minerals mined from the Earth, none is more useful than gold. Its usefulness is derived from a diversity of special properties. ● Gold conducts electricity, does not tarnish, is very easy to work, can be drawn into wire, can be hammered into thin sheets, alloys with many other metals, can be melted and cast into highly detailed shapes, has a wonderful color and a brilliant luster. ● Gold is a memorable metal that occupies a special place in the human mind. Due to these wonderful properties gold is being used into various places in the world, such as: Jewelry, Financial Gold: Coinage, Bullion, Backing, Electronics, Finances and Investing IMPORTANCEOFGOLD
- 6. Long before any gold can be extracted, significant exploration and development needs to take place, both to determine, as accurately as possible, the size of the deposit as well as how to extract and process the ore efficiently, safely and responsibly Goldminingprocess ● EXPLORATION ● DEVELOPMENT ● OPERATIONS ● DECOMMISSIONING
- 8. ● The best estimates currently available suggest that around 197,576 tonnes of gold has been mined throughout history, of which around two-thirds has been mined since 1950. ● Each year, global gold mining adds approximately 2,500-3,000 tonnes to the overall above-ground stock of gold hOWMUCHGOLD HASBEENMINED HOWMUCHISLEFTTOBEMINED ● Accurately estimating the amount of gold still within the ground is no easy task, and this estimate may change in response to several factors. ● But Experts have estimated that we have less than 54,000 tons of gold left to discover.
- 10. Significanceofgoldin indianculture Gold has a deep rooted significance in Indian history, alluring people from different parts of the world with its beauty and charm. Gold, in Indian history is more than an investment, it is a culturally significant metal which has found a place in Indian hearts and homes alike.There are a few reasons which have propelled gold to a pedestal in India, a spot which it is likely to hold on to for a long time. ● Religious Connotations ● Family heirloom ● Golden Gifts ● Status Symbol ● Investment
- 12. ● Advantages 1.Easy and convenient purchase 2.Cash purchase is possible 3.High liquidity ● Problems 1.Threat of theft / loss 2.Making charges 3.High storage cost 4.Difficult to detect impurity 5.Lack of standard pricing GoldInvestmentin Traditionalor Physicalform
- 13. 1. It is like any other mutual fund. 2. AMC invests in gold, securities of gold mining companies and Gold ETFs. Advantages 1. Any time entry and exit option for investors. 2. Small amount of investment - ₹ 500 or more. SIP option available. Problems 1. Returns depend on fund performance. InvestmentinGoldFunds
- 15. Similar to mutual funds which invest in gold and which are traded in stock exchange. Advantages 1. Any time entry and exit option for investors. 2. Small amount of investment is possible. SIP option available. 3. Investor holding equivalent of 1 KG gold ( or its multiple) in ETF may opt for redemption in physical gold. Problems 1. Returns depend on fund performance. GoldExchangeTradedFund
- 16. 1. Similar to buying physical gold. By paying money, you get a notional credit in your gold account. 2. The intermediary selling digital gold maintains inventory in physical gold. Advantages 1. Anytime entry and exit options. 2. Option to get delivery in physical form. 3. You can invest even ₹ 1. SIP option available. Problems 1. Not a regulated product. 2. Intermediary cost and taxes makes it expensive comparatively. DigitalGold
- 17. 1. SGBs are relatively a new form to invest in Gold. Bonds are in the market since 2015. 2. It’s a Government Security, issued and managed by RBI. 3. SGBs are held in Bond Ledger Account maintained by RBI. 4. Investors are allotted units against the price paid by them. 5. Purchase and Redemption price are based on prevailing market price. SovereignGoldBond
- 18. 1. Who can buy SGB? Any Indian resident – individuals, Trusts, HUFs, charitable institutions and universities. Investment may be on behalf of a minor. 2. Investment limits – Per Investor on the basis of PAN Minimum - 1 unit (or gram) Maximum - 4000 units or 4 Kilograms per investor per financial year (for individual and HUF) 3. Allotment - Investors get ‘Certificate of Holding’ generated from e-Kuber portal of RBI. Alternatively, units are allotted in demat account mentioned by investor in the subscription form. 4. Interest - At present 2.50% pa, paid half yearly. Interest is credited in the linked bank account. Interest at saving bank rate is paid on the investment amount from date of investment to date of allotment. Featuresof SGB
- 19. Direct subscription when issue is on. ● Through banks, select post offices, stock exchanges and Stock Holding Corporation of India Limited (SHCIL). ● Application for subscription can be made in paper form or through netbanking. ● If application and payment are made online, price discount @ 50 per gram available. ● Generally available for a week in each month. ● Purchase upto ₹ 20,000 may be in cash. HowtoSubscribe/PurchaseSGB? Secondary Market Purchase ● Already issued SGB can be purchased anytime through your stock broker. ● Price can be different from initial subscription price. ● Purchase will be in demat form.
- 20. Rematerialization of SGB 1.SGBs held in demat account can be converted in physical form anytime before maturity. 2.You need to submit a request to your DP. 3.You need to mention name of the entity (bank or post office) through which you want to hold physical SGB and bank account details. 4.That entity will enter your request in e-Kuber portal of RBI. 5.Bonds will be debited from your demat account and a certificate of holding will be issued to you after confirmation by RBI. 6.Before opting for remat, please check with DP about the charges payable. Dematerialization of Physical SGB 1.Physical SGBs can be converted in demat anytime before maturity. 2.You need to submit a request to entity through which you purchased SGB. 3.You need to mention your DP ID and Client ID in which you want the credit. You may use your existing demat account. No need to open a new account. 4.That entity will enter your request in e- Kuber portal of RBI. 5.Bonds will be credited to your demat account after confirmation by RBI.
- 21. 1.SGBs can be transferred anytime before maturity through sale or by way of gift. 2.Transfer can be for entire or part quantity. 3.Physical SGBs can be transferred by submitting a request in prescribed Transfer Form and copy of Certificate of Holding to the entity through which you purchased it. 4.That entity shall enter the details in e-Kuber portal after verification of details and KYC of transferor and transferee. 5.After confirmation of the request by RBI, revised Certificate of Holding may be generated from the e- Kuber portal and issued to the transferee. 6.SGBs held in demat account can be transferred or gifted by way of an off market transaction through your DP. 7.The transferee will receive interest and maturity payment on the relevant due dates. TransferofSGB
- 22. 1.You may sell the SGBs held in demat account any time through your stock broker at the prevailing market price. 2.Banks extends loan against SGB held in physical or demat form. 3.SGBs held in demat account or physical form can be surrendered to RBI for premature redemption after 5 th year. Request for early redemption must be given at least 10 days before the date of interest payment. 4.For early redemption of SGBs held in demat form, ‘Redemption / Repurchase Form’ should be submitted to DP. Please ensure that bank details are correctly recorded in demat account. 5.Redemption (early or upon maturity) take place at prevailing market price and proceeds are credited to linked bank account of the investor. HowtoliquidateinvestmentinSGB beforematurity?
- 23. Particulars Physical Gold Digital Gold Gold Fund Gold ETF Sovereign Gold Bond Returns Only on account of price escalation Only on account of price escalation Directly related to Fund performance Directly related to Fund performance Twin returns – half yearly interest and on account of price escalation Purity Doubtful (unless BIS mark or other wise certified) Purity is guaranteed by selling intermediary Not applicable Not applicable Not applicable Tax LTCG after three years with indexation benefit LTCG after three years with indexation benefit LTCG after three years with indexation benefit LTCG after three years with indexation benefit No LTCG if held till maturity, else taxable with indexation benefit. Interest income is taxable. Acceptability as collateral Yes Not at present No No Yes Entry option Any time Any time Any time Any time Direct purchase when tranche is open. Any time purchase in stock market. Exit option Any time Any time. There may maximum storage period. Any time Any time Restrictive (in paper form). If held in demat, can be sold anytime Storage cost High No No No No Demat account Not applicable Not applicable Optional Essential Optional Regulation None None SEBI SEBI RBI
- 24. RBINOTIFICATION Interest Rates The gold bond rate of interest is 2.5% in a financial year currently. The interest payout is twice a year on the nominal value of the investment. The returns are linked to the current market price of the gold.
- 26. Gold mining Gold mining is a global business with operations on every continent, except Antarctica, and gold is extracted from mines of widely varying types and scale. At a country level, China was the largest producer in the world in 2020 and accounted for around 11 per cent of total global production.
- 28. Liquidity& holdings ● Gold is a liquid asset, ranking at levels comparable to many global stock markets as well as currency spreads. ● Its liquidity is often sourced during periods of stress in the markets, one of its appealing qualities. We examine liquidity across the global OTC, futures, and ETF markets.
- 37. ● Gold’s diverse uses, in jewellery, technology and by central banks and investors, mean different sectors of the gold market rise to prominence at different points in the global economic cycle. ● This diversity of demand and self-balancing nature of the gold market underpin gold’s robust qualities as an investment asset. Supply&demand stats
- 42. Longterm performance ● There is a positive link between gold prices and economic growth via demand for gold in the form of jewellery, technology and long-term savings. This is particularly true in developing economies where gold is often used as a luxury item and a means to preserve wealth. ● Market risk and uncertainty are equally relevant to gold’s long-term performance. Many investors view gold as the ultimate safe haven - effective in hedging currency depreciation, high inflation, and other systemic risks. ● Gold prices are determined by the interaction of drivers from four key categories: 1) wealth and economic expansion 2) market risk and uncertainty 3) opportunity cost 4) momentum and positioning.
- 47. Driver categories Drivers of the gold price can be broadly grouped into the following four categories: ● Economic Expansion: Rising income is associated with higher demand for jewellery, technology and long-term savings. The constant in our model captures this driver ● Risk and Uncertainty: Market downturns often boost investment demand for gold as a safe haven asset. In our model, market risk is captured by relative equity/bond flows, implied gold volatility, Federal reserve assets, the price of crude and break-even inflation ● Opportunity Cost: The perceived relative value of competing assets including bonds (interest rates) and currencies influence investor attitudes towards gold. Three variables capture this theme: nominal 10-year Treasury bond yields, a developed market currency index and an emerging market currency index. ● Momentum: Asset flows and price trends can intensify or diminish gold’s performance. Three variables capture momentum and positioning in our model: The lagged return of gold, ETF flows and COMEX futures positioning.
- 49. Decreasein thesupplyof thegold ● Gold behaves less like a commodity than like long-lived assets such as stocks or bonds. ● That characteristic makes expectations particularly important because, like the stock market, gold prices are forward-looking, and today’s price depends heavily on future demand and supply. ● There also has been increase in monetary and non-monetary demand of gold thus pushing price of gold.
- 50. Inflation rates ● Gold is also commonly believed to be a hedge against inflation. ● To be a hedge, Gold would not only have to be uncorrelated with inflation, it would have to be negatively correlated. ● By the help of a decade periods particularly stand out that higher gold prices also lead to the rate of inflation with reference to Indian country.
- 51. Interes trates ● Interest rates are major indicator of where gold prices are likely to go. ● Gold is a non- income producing asset. Hence when interest rates are high, bonds become a more attractive option to invest in to yield higher returns. ● Gold prices and interest rates are negatively correlated. ● Money lenders are also willing to lend out their money rather than to invest in gold when interest rates are high as during this period capital is scarce and in high demand.
- 53. Currency fluctuations ● The role of currency valuation in pricing commodities, particularly imported commodities, such as oil and gold. ● The material commodities however which possess these qualities in the highest degree are gold and silver. ● Gold has inverse relationship with the dollar, suggests that as the dollar loses value the price of both(Gold & Silver) commodities increases. ● Dollar is de-facto currency exchange all around the world. But when USA on financial depression gold has been substituted as a safe haven for investment.
- 55. Geopolitical concerns& Economicstrength ● The current financial system of stock markets, debt fuelled growth and at paper currencies operate successfully under the assumption that things continue without a hitch. When any of these assumptions begin to break down, the rest of the system can too and hence gold becomes a main fall back. ● When the economy is strong, stocks rise in value. Investment demand shifts away from these precious metals and other commodities that don't generate income. ● On the other hand, when the economy weakens, demand for financial assets slackens that drives more money towards gold since it is a stable investment. ● Any major world event for example a terrorist attack, some war or crisis occurs – safety of gold ownership is always preferred. At such times, the prices usually respond upwards.
- 57. Annual returns
- 58. INDIAN GOLD RETURNS ● Physical gold holdings by investors and central banks at ₹266-lakh crore with an additional ₹68-lakh crore in open interest through derivatives traded on exchanges or the over-the-counter (OTC) markets. ● Gold trading volumes averaged ₹10.3-lakh crore per day last year, against the OTC spot and derivatives contracts trading of ₹5.5-lakh crore while gold futures traded 4.6 tonne per day across various global exchanges. ● Gold trading volumes on the MCX came up to ₹6,100 crore per day. Gold-backed ETFs offered an additional source of liquidity, with the Indian-listed funds trading on an average of ₹180 crore per day.
- 59. Thanks!!