1.
● Prepared By: Vishesh Kumar
Importance
ofgoldin
financialmarkets

2.
01
05
03
02
06
04
Whatis
gold?
Significance
ofgoldin
globalterms
Investment
waysingold
Factors
responsiblefor
goldprices
Modern
investment
waysingold
Importance&
significance
ofgold

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

7.
GoldProduction(2020)

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.

9.
World’s Gold(end-2019)
Other

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

11.
WAYSOFInvestmentin
GOLD

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

14.
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

15.
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

16.
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

17.
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

18.
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.

19.
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.

20.
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

21.
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?

22.
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

23.
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.

24.
Significance
ofgold

25.
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.

26.
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.

27.
Survey ofdifferent
centralbanksof
differentcountries

28.
● 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

29.
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.

30.
Shortterm
performance

31.
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.

32.
Inflation&interest
rates
FactorsInfluencingPricesofgold
Decreasein supply
ofgold
Currency
fluctuations
Geopolitical
concerns&economic
strenths

33.
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.

34.
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.

35.
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.

36.
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.

37.
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.

38.
WeaknessinFinancialMARKETS

39.
Annual
returns

40.
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.

41.
Thanks!!