Gold

Contents General Facts

Why invest in Gold?

Price Determining factors for gold

Central Banks

Hedge against Financial stress

Jewelry and Industrial demand

Gold Mining Production and Supply

Gold demand and supply

War, Invasion and Economic Uncertainty

Economic Indicators Impacting Gold Prices

Gold Demand in India

General Facts 60% of gold mined becomes jewelry.

394% increase in the price of gold from Dec 2000to October 2010.

22 times gold has reached new highs in 2010.

100 million people depend on gold mining for theirlivelihood.

2nd quarter gold demand was 919.9 tonnes worthUSD$44.5bn.

WHY INVEST IN GOLD?

Gold is a foundation asset within any longterm savings or investment portfolio.

One of the few financial assets that do notrely on an issuer's promise to pay.

It offers investors insurance against extrememovements in the value of other assetclasses.

Central Banks’ purchases/sales. Hedge against financial stress.

Jewelery and Industrial demand.

Gold mining Production and Supply.

War, invasion and economic uncertainty.

CENTRAL BANKS

Central banks and IMF play an important role in the gold price.

Interest rates are closely related to the price of gold.

Gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates.

India stands 11th in Gold Holdings with 557.7 tonnes.

Central bank activity among the VIST (Vietnam, Indonesia, South Korea and Thailand) nations in terms of gold holdings increased by 28% in 2011.

Central Banks’ purchases/sales.

Hedge against financial stress.

Jewelry and Industrial demand.

Gold mining Production and Supply.

War, invasion and economic uncertainty.

HEDGE AGAINST FINANCIAL STRESS

Gold can be used as a hedge against inflation,deflation or currency devaluation.

Within the current economic scenario,countries are faced with huge deficits andmore money that is pumped into theseeconomies – the printing of money basically –then less valuable the currencies become.

If the return on bonds, equities and real estateis not adequately compensating for risk andinflation then the demand for gold and otheralternative & safe investments increases.

Central Banks’ purchases/sales.

Hedge against financial stress.

Jewelry and Industrial demand. Gold mining Production and Supply.

War, invasion and economic uncertainty.

JEWELRY AND INDUSTRIAL DEMAND

Jewelry accounts for over two-third of annual global demand.

India is the largest consumer of gold Jewelry followed by China and the U.S.

Industrial, dentistry and medical uses account for around 12% of gold demand.

Central Banks’ purchases/sales.

Hedge against financial stress.

Jewelry and Industrial demand.

Gold mining Production and Supply. War, invasion and economic uncertainty.

GOLD MINING PRODUCTION AND SUPPLY

The mining production rose by 7 percent to 708.8 tonnes in 2nd

quarter 2011.

Producer de-hedging exerted a modest negative influence on supply in second quarter.

Recycling activity was 3% down year-on-year, as consumers in many markets held off on selling their existing 'loose' holdings of gold in anticipation of higher prices.

The completion of de-hedging by world’s two miners Barrick Gold mine and Anglo Ashanti Gold mine reduces the possibility of a price rise as seen in 2009 and 2010.

Central Banks’ purchases/sales.

Hedge against financial stress.

Jewelry and Industrial demand.

Gold mining Production and Supply.

War, Invasion and Economic uncertainty.

WAR, INVASION AND ECONOMIC UNCERTAINTY

In times of war or in terms of economicuncertainty, people fear that theirassets may reduce in value, that thecurrency may become worthless.

Governments/people believe that Gold isa solid asset which will buy food/transportation etc. or that it can beused as an alternate currency duringsuch periods of uncertainty.

Gold @$1700

Gold @$1800

Standard and Poor (S&P) downgrades U.S credit rating in August 2011

Greece on verge of 98 percent default in September 2011

Standard and Poor (S&P) downgrades

Italy’s credit rating in September 2011

Gold Demand and Supply

Gold Demand and Supply

Year

ECONOMIC INDICATORS IMPACTING GOLD PRICES

GDP

Non Farm Payrolls

Industrial Manufacturing Data

Business Inventories

Value of U.S dollar

Economic Stimulus package if announced

Trade deficit

SPOT GOLD V MCX GOLD (3 YEAR TREND)

Spot Gold

MCX Gold

Going hand in hand

SPOT GOLD V SENSEX (3 YEAR TREND)

Spot Gold

Sensex Index

SPOT GOLD V DOLLAR (3 YEAR TREND)

Spot Gold

Dollar

Negative Correlation

GOLD DEMAND IN INDIA

Gold demand in India will continue to be robust inthe next decade.

The cumulative annual demand will be in excess of1,200 tonnes by 2020, valued at about Rs2,50,000 crores.

According to the World Gold Council (WGC)report for 2nd quarter 2011, the demand for goldin India would be driven by rapid GDP growth,urbanization and rise in income and savings levelsof the consumer.

Gold jewelry represented around 75 per cent of thetotal Indian gold demand in 2010.

The southern states like Kerala, Andhra Pradesh,Tamil Nadu and Karnataka account for over 40 percent of the country's gold demand.

The research highlights that with 50 per cent of theIndian population under 25 and approximately 150million weddings anticipated over the next decade,which will drive gold consumption.

TYPES OF INVESTMENTS

Physical Metal

Gold ETFs

GOLD IS ALSO VOLATILE……

Common Man : WeddingAssume that on September 30th, John Thomas fixed his daughter Christina Johan’s wedding to be on 2012 May 6th, and that he plans to buy 25 pavan (200 g) gold as jewelry.

Mr. John’s choices

Hope Prices falls before Marriage

Buy 200g Gold now Buy 2 mini Gold MCX futures @ 2750/g

•Block over 5.5 lacs (at present level).

•Risk the possibility of a price fall later.

•Block only less than 50,000 as margin amt (at present prices)

•Invest the rest of 5 lacs in bank or other safe assets for 1 month.

•Hold the gold in dematform, maintain MTM.

P/L scenario @ End of April 2012 for MCX Gold purchase @2750

Time April 2012 Price@ 2900/g April 2012 Price@ 2650/g

Profit Rs.20,000 profit from futures + Rs.26600 interest

gain (8%)

Rs. 20,000 loss from futures + Rs. 26600 interest gain

(8%)

Conclusion Buy jewelry at high Oct prices, (and more with the

extra gain)

John avoids the high priced buy in Dec. Would be able to buy Jewelry at lower April

prices.

Note: This notional loss from futures can be reduced or nullified. Standinginstruction can be given to exit futures if price fall below 2700 (or suitableprices), so that the loss is limited to Rs.10000 or even much lower. Theflexibility of easy entry and exit available through online futures tradingplatform, enables even better strategies than that mentioned above.

Jeweler Scenario: Risks on both directions due to high volatility.

Advance booking by customers

Commitment to suppliers

Jeweler choices

Hope Prices do not fall sharply after stocking or Hope that prices do not

rise sharply before stocking

Hedge with gold futures; Sell and buy against each stock moves

•Avoid distress sales or purchases•Reduce losses•Make modest gains

Advantages of Gold Futures (MCX) platform

Online Terminal (View/Trade at the comfort of your home/office)

High depth/liquidity (MCX is no: 1 in India and no: 2 in world as per its website.)

Different denominations available (1kg, 100g, 8g, 1g).

Trading hours (10am to 11 30pm) covers all major mkts.

Take/Delivery if you want.

Store/Sell from demat.

Margins as low as 4 to 7%

USE our research to know about major trends, entry/exit points etc.

Daily Gold report

Strategies (Short term as well as long term) for both International as well as MCX Gold

News Alert : Both Indian as well as International

Technical Analysis and Charts

Customer support through phone, sms, email, website

Research Support

Geofin Comtrade Ltd.

Geojit BNP Paribas Building

10th Floor, 34/659-P,

Civil Line Road, Padivattom

Kochi-682 024 Kerala

Phone: 91 484 2901058

MCX Member code: 40220 FMC No.: MCX/TCM/CORP/1710

NCDEX Member code : 00920 FMC No.:NCDEX/TCM/CORP/0895

NMCE Member code: CL0324 FMC No.: NMCE/TCM/CORP/0245

ACE Member code: 6192 FMC No: ACEL/TCM/CORP/0429

Disclaimer

Trading/investing in Commodity Derivatives involves considerable risk you may lose part or all of the initial

investment. It is not ideal for all types of investors, and you are advised to seek professional assistance before

the same. Past performance may not necessarily be repeated in the future. The news and views posted on this

report is based on information which is believed to be accurate. This report is provided to enable you to make

your own investment decisions and should not be construed as investment advice. The anticipatory moves

mentioned in the report is purely subject to technical studies and does not take into consideration sudden

currency volatility and data events. The author, directors and/or employees of Geofin Comtrade cannot be held

responsible for the accuracy of the content posted on this report or for decisions taken by the readers based on

such information.