Investment in gold in india pdf

Over the long term, official sector reserves have remained remarkably stable. On certain occasions, the gold used for minting legal tender coins has been obtained from official reserves. The largest source of demand is the jewelry industry. In recent years, demand from the jewelry industry alone has exceeded global mine production. This shortfall has been bridged by supplies from scrap, official sector sales as well as the release of gold into the market by various par- ticipants for the purposes of gold borrowing.

Besides jewelry, gold is used in a variety of industries including aerospace, medicine, elec- tronics and dentistry. The electronics industry needs gold for the manufacture of computers, telephones, televisions and other equipment.

In dentistry, gold alloys are popular because they are highly resistant to corrosion and tarnish. Finally, there are investors, hedgers and specula- tors. Depending upon market circumstances, the investment component of demand can vary sub- stantially from year to year. For historical reasons, the world looks to London for price leadership. Its weight is a good measurement of a unit of value.

Market cycles are permanent facts of life but gold has maintained its long- term value. In contrast, most currencies including the U. This is why gold is often purchased as a hedge against inflation and currency fluctuations.

Chart 3 demonstrates that gold has kept up with the US inflation rate over the past years. Throughout history, national currencies have come and gone but gold has remained remark- ably stable. It is not directly affected by the economic policies of any indi- vidual country and it cannot be repudiated or frozen as in the case of paper assets. For these reasons, one quarter of all the gold in existence is held by governments, central banks and other official institutions as part of their international monetary reserves.

It can be readily sold hours a day in one or more markets around the world. In addition, the trading spreads on bullion are comparable to those on stocks and bonds which are considered to be liquid assets. Finally, it takes about the same amount of time to execute a trade in gold as it does for stocks and bonds. For this reason, many experts urge investors to keep a portion of their total assets in gold. Since most port- folios are invested primarily in traditional financial assets such as stocks and bonds, adding gold to a portfolio introduces an entirely different asset.

The purpose of diver- sification is to protect the total portfolio against fluctuations in the value of any one asset class. Gold does exactly that. The economic forces that determine the price of gold are different from, and in many cases opposed to, the forces which determine the prices of most financial assets.

For example, the price of a stock depends on the earnings and growth potential of the company it repre- sents. Likewise, the price of a bond depends on its safety, its yield, and the yields of compet- ing fixed income investments. The price of gold, however depends on different factors including the supply and demand for gold, the status of the U. Stocks Real Estate -8 T. Stocks Small Cap. Stocks 0 50 Correlation with Gold x cause the price of gold to move independently of the prices of other assets in a portfolio.

Gold is the only asset that is negatively correlated with other asset classes as demonstrated in Chart 4 above. Therefore, its price generally moves in the opposite direction from other asset classes such as U.

Due to its negative correlation to other asset classes, gold can reduce portfolio volatility or risk. Chart 5 illustrates how a negatively-cor- related asset like gold can lower portfolio volatility or risk. The more negative the correlation between the new asset and the pre-existing portfolio, the lower the overall level of volatility will be for the new portfolio.

For example, if the new asset is per- fectly correlated with the pre-existing portfo- lio that is, the correlation is , then adding any amount of the new asset will not change the level of portfolio risk. Gold is a long-term store of value, as well as a highly-liquid, international- ly-recognized asset of last resort.

It can diver- sify and thus stabilize your portfolio, offer- ing protection against market fluctuations. Gold is also easy to buy and sell, any time, anywhere in the world. The right time to buy gold is when you understand what it is and what it can do for your portfolio.

Gold bullion is available through precious metals and coin dealers, selected brokerage firms and banks throughout the U. As with any investment, it is always advisable to check the terms of the purchase agreement, proce- dures and prices offered by the dealer. Prospective investors should consult their financial advisor regarding tax laws or other circumstances.

One troy ounce equals 1. The bars are generally stamped. Gold bullion bars can be purchased from selected commercial banks, brokerage houses, and precious metals dealers. The bullion coin represents an investment in pure gold, and because it is legal tender, its authenticity is guaranteed by the country of origin. The bullion coin bears a face value that is largely symbolic; its true value depends on its gold content and the daily price of gold.

Coins make valuable gifts. Bullion coins can be easi- ly bought and sold virtually anywhere in the world. Banks and dealers make a market to buy and sell these bullion coins in much the same way as they do for regular bullion. For instance, you can take physical delivery direct possession and enjoy the security of having your investment in your own hands. Or you can buy bullion through a storage pro- gram, in which case your broker, banker or dealer will use a secure, third-party depository to hold and protect your gold for a small fee.

Holding a gold storage account is an attractive alternative to purchasing physical metal. Create your free account to read unlimited documents. Why gold should be considered in an efficient portfolio to maximize the returns and minimize the risk? This ppt is able to answer this question to a great extent. The SlideShare family just got bigger.

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