A STUDY ON

ANALYSIS OF GOLD &SILVER PERFORMANCE IN INDIAN WITH SPECIAL REFERENCE TO RELIANCE CAPITAL

Submitted in Partial Fulfillment of the Award of the Degree

Of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

P.SANGEETHA
M.B.A H.T NO: ______________

Under The Guidance Of

Mrs. _______________
M.B.A (ASST.PROF)

DEPARTMENT OF MANAGEMENT STUDIES

ST XAVIERS PGCOLLEGE (AFFILIATED TO OSMANIA UNIVERSITY)

HYDERABAD 2011-2013

DECLARATION
I

P.SANGEETHA (HT:

) hereby declare that the project report

titled ANALYSIS OF GOLD &SILVER PERFORMANCE IN INDIAN at

RELIANCE CAPITAL. HYDERABAD, has been completed successfully and this

project submitted towards the partial fulfillment of the requirement for award of MBA DEGREE with a specialization in FINANCE from OSMANIA UNIVERSITY , is my own and has not been submitted Any Where Before To Any Other University Or Institution.

DATE: 20 -04-2012, PLACE: HYDERABAD.

P.SANGEETHA

ACKNOWLEDGEMENT
I am very thankful to my Internal Guide Ms______, asst coordinator, RISHI UBR PG COLLEGE For her valuable suggestions throughout my project work. I take great pleasure to express my deep sense of gratitude to one and all in the company who has been directly or indirectly helpful to me in completing the project. I am also immensely thankful to my project guide Mr. SRI HARI, who helped in successful completion of this project work. I take this opportunity to express my heartfelt thanks to the jm financial services panjagutta Hyderabad, for giving me an opportunity to undertake my project work.

P.SANGEETHA

CONTENTS
PARTICULARS CHAPTERS PAGE:NO

INTRODUCTION 1 NEED & IMPORTANCE OF THE STUDY OBJECTIVES OF THE STUDY SCOPE OF THE STUDY METHODOLOGY OF THE STUDY LIMITATIONS OF THE STUDY

1-26

LITERATURE REVIEW

27-37

COMPANY PROFILE
3

INDUSTRY PROFILE
38-42

DATA ANALYSIS &INTERPREATION

4

43-51

CONCLUSIONS FINDINGS, SUGGESTIONS BIBLIOGRAPHY

52-53

INTRODUCTION

INTRODUCTION
We are moving from a world in which the big eat the small to one in which the fast eat the slow.-Klaus Schwab, 2000 (founder of the World Economic Forum) A strong and vibrant cash market is a pre-condition for a successful and transparent futures market. Before the North American futures market originated some 150 years ago, farmers would grow their crops and then them to market in the hope of selling their commodity of inventory. But without any indication of demand, supply often exceeded what was needed, and not purchased crops were left to rot in the streets. Conversely, when a given commodity such soybeans were out of season, the goods made from it became very expensive because the crop was no longer available, lack of supply. In the mid-19th century, grain markets were established and a central marketplace was created for farmers to bring their commodities and sell them either for immediate delivery (spot trading) or for forward delivery. The latter contracts, forwards contracts, were the fore-runners to todays future contracts. In fact, this concept saved many farmers from the loss of crops and helped stabilize supply and prices in the off-season. Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts, A commodity exchange is an exchange where various commodities and derivatives products are trade. Most commodity markets across the world trade in agriculture products and other raw materials like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, metals, etc. and contract based on them. These contracts based on them. These contracts can include spot prices, forwards, futures and options. Commodities exchanges usually trade futures contracts on commodities, such as trading contracts to receive something, say corn, in a certain month. A former raising corn can sell a future contract on his corn, which will not be harvested for several months, and guarantee the price he will be paid when he delivers; a breakfast cereal producer buys the contract now and guarantees the price will

Not go up when it is delivered. This protects the farmer from price drops and the buyer from price rises. Speculators and investors also buy and sell the future contracts to make a profit and provide liquidity to the system. Commodities have occupied a large space in everyones life without even notifying them. Man has bought commodities either for their survival or to make their life comfortable. But at present scenario one can reverse the cycle i.e. by trading in commodities and make money. Yes, it is just like buying and selling of shares of companies, one can buy and sell commodities. The commodities market is one of the oldest prevailing markets in the human history. It dates back to Greek times when olive trees were auctioned and the future market was born. In fact, during the 17th century, rice futures were traded in china. Commodities are much diversified and each commodity has got its own value which keeps on changing according to their demand in the market. This fluctuation can differ from time to time owing to numerous factors. In this project is specifically focused on Gold and Silver, the precious metals. Gold and silver are most talked about commodities. This study gives a complete picture to the investor about the investment in gold and silver.

Commodity
Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines goods as every kind of movable property other than actionable claims, money and securities. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and unginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc.

Commodity market:Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant,

active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts. The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets. For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another.

The economic impact of the development of commodity markets is hard to overestimate. Through the 19th century "the exchanges became effective spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade."

OBJECTIVE OF THE STUDY

To learn about the Indian commodity market.
To study different price drivers affect the Gold and silver.(2012)

To find out how price of Gold and silver fluctuate in Indian Commodity market To interpret about movement of future price of gold and silver in commodity market. To derive the relation of these commodities with other financial instruments such as money supply.

NEED &IMPORTANT OF THE STUDY The commodity market is still new and growing in India and it has a bright scope to develop, on that view this research study is taken. The Research main intention is to know the various price drivers that determine the price of commodity. The main problem in the commodity market is the prediction of future price of commodity; especially prediction of price of global metals (gold and silver) is very difficult. The future prediction will be made on the basis of the past response of commodity market to various price drivers. Especially this research on Gold and silver because these two commodities have global market with high volatility. The price of gold and silver are highly affected by the various factors happening in and around the world. In order to know behavior of this to commodity to that factor, researcher referred past reacts of commodity market.

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RESEARCH METHODOLOGY
Research in common parlance refers to a search for knowledge. In fact research is an art of scientific investigation. The Advanced Learners Dictionary of current English lays down the meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge. For the preparation of the project report several method were used to collect data and pertinent information. The data required for the studies were collected is primary source. Detailed questionnaire were prepared for the different departments covering as many variables as possible

Source of data
Data is the fact or an event. This data or information is needed for every research work. The data can be classified into two types: that is 1) Primary data 2) Secondary data Primary data Data originally collected for an investigation are known as primary data. Such data are originally in character and are generated in large number of survey conducted by individual researcher on research bodies. For example data collected by the researcher from the interviewing investor. Collecting the opinion of investor about commodity market situation Interviewing the Angel investment analyst. Secondary data Data which are actually collected for some earlier research work and are applicable or usable in future research and which already have been passed through the satisfied process. The secondary data for this study was collected from the relevant journals, newspapers, and textbooks The main source of secondary data for this Project is Internet source like MCX, NCDEX.

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SCOPE OF THE STUDY

The scope of study shows the outer line or border of the research study. This study limited to only two commodities, i.e. Gold and Silver. This study is based on last one year performance of Gold and silver. This study relates to only Indian commodity market that is MCX, NCDX.

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LIMITATION OF STUDY
The following are some of the limitations of the study: 1) The project work was required to be completed within a short period of time. So time constraint was one of the main limitations of the study. 2) Most of the informations are collected from secondary data, so researcher cant say it 100% applicable. 3) There is no particular format for the study. 4) Cost Constraint.

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CHAPTER-2 REVIEW OF LETERATURE

14

REVIEW OF LETERATURE
Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. The concept of organized trading in commodities evolved in Chicago, in 1848. But one can trace its roots in Japan. In Japan merchants used to store Rice in warehouses for future use. To raise cash warehouse holders sold receipts against the stored rice. These were known as rice tickets. Eventually, these rice tickets become accepted as a kind of commercial currency. Latter on rules came in to being, to standardize the trading in rice tickets. In 19th century Chicago in United States had emerged as a major commercial hub. So that wheat producers from Mid-west attracted here to sell their produce to dealers & distributors. Due to lack of organized storage facilities, absence of uniform weighing & grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually sellers & buyers started making commitments to exchange the produce for cash in future and thus contract for futures trading evolved. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved, in advance. This kind of agreement proved beneficial to both of them. As if dealer is not interested in taking delivery of the produce, he could sell his contract to someone who needs the same. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. The price of such contract would dependent on the price movements in the wheat market. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climatic factors. This promoted traders entry in futures market, which had no intentions to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any

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commodity can be traded. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing, and transfer of agricultural products. In 1933, during the Great Depression, the Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand.

International Commodity Exchanges

Futures trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world.

The New York Mercantile Exchange (NYMEX)

The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: - Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc.

London Metal Exchange

The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century.

Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density

16

Polyethylene, etc.

The Chicago Board of Trade

The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. Commodities Traded: - Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, and Silver etc.

Tokyo Commodity Exchange (TOCOM)

The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia Commodities traded: - Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc

Chicago Mercantile Exchange

The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the worlds first financial futures more than 30 years ago. Commodities Traded: - Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc.

Introduction to Indian commodity market

India, a commodity based economy where two-third of the one billion population depends on agricultural commodities, surprisingly has an under developed commodity market. The vast geographical extent of India and her huge population is aptly complemented by the size of her market. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market.

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India Commodity Market can be subdivided into the following two categories: Wholesale Market Retail Market

The traditional wholesale market in India dealt with whole sellers who bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the consumers. With the passage of time the importance of whole sellers began to decline due to various reasons. In recent years, the extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. In fact, the success stories of the commodity market of India in recent years has mainly centered on the growth generated by the Retail Sector. Almost every commodity under the sun both agricultural and industrial is now being provided at well distributed retail outlets throughout the country.

Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure. The organized sectors on the other hand are owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually selling a wide range of articles both agricultural and manufactured, edible and inedible, perishable and durable. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. However the growth of such markets has still centered on the urban areas primarily due to infrastructural limitations. Considering the present growth rate, the total valuation of the Indian Retail Market is estimated to cross Rs. 10,000 billion in the year 2010. Demand for commodities is likely to become four times by 2012 than what it presently is.

History of Commodity Market in India

The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in

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1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis. (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Government. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commodity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multicommodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.There are other regional commodity exchanges situated in different parts of India.

Legal framework for regulating commodity futures in India

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The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution

Forward Markets Commission (FMC)

It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.

National Commodities & Derivatives Exchange Limited (NCDEX) National Commodities & Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line Commodity Exchange with an independent Board of Directors and professionals not having any vested interest in Commodity Markets.

It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency.

NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities. Commodities Traded at NCDEX

Bullion - Gold KG, Silver, Brent Minerals - Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots
Oil and Oil seeds - Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell),

Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein,

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Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow soybean.
Pulses - Urad, Yellow peas, Chana, Tur, Masoor, Grain - Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice,

Indian raw Rice (ParmalPR-106), Barley, Yellow red maize

Spices - Jeera, Turmeric, Pepper Plantation - Cashew, Coffee Arabica, Coffee Robusta Fibers and other - Guar Gum, Guar seeds, Jute sacking bags, Indian 28 mm cotton, Mulberry, Green Cottons Potato,

Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Energy - Crude Oil, Furnace oil.

Raw Jute,Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334

Multi Commodity Exchange of India Limited (MCX)

Multi Commodity Exchange of India Limited (MCX) is an independent and de-metalized exchange with permanent reorganization from Government of India, having Head Quarter in Mumbai. Key share holders of MCX are Financial Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation Bank of India, Bank of India and Canara Bank. MCX facilitates online trading, clearing and settlement operations for commodity futures market across the country.

MCX started of trade in Nov 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, pulses Importers Association and Shetkari Sanghatana. MCX deals wit about 100 commodities. Commodities Traded at MCX

Bullion - Gold, Silver, Silver Coins, Minerals - Aluminum, Copper, Nickel, Iron/steel, Tin, Zinc, Lead Oil and Oil seeds - Castor oil/castor seeds, Crude Palm oil/ RBD Pamolein, Groundnut oil,

Mustard/ Rapeseed oil, Soy seeds/Soy meal/Refined Soy Oil, Coconut Oil Cake, Copra, Sunflower oil, Sunflower Oil cake, Tamarind seed oil,

Pulses - Chana, Masur, Tur, Urad, Yellow peas Grains - Rice/ Basmati Rice, Wheat, Maize, Bajara, Barley, Spices - Pepper, Red Chili, Jeera, Cardamom, Cinnamon, Clove, Ginger,

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Plantation - Cashew Kernel, Rubber, Areca nut, Betel nuts, Coconut, Coffee, Fiber and others - Kapas, Kapas Khalli, Cotton (long staple, medium staple, short staple), Cotton Cloth, Cotton Yarn, Gaur seed and Guargum, Gur and Sugar,

Khandsari, Mentha Oil, Potato, Art Silk Yarn, Chara or Berseem, Raw Jute, Jute Goods, Jute Sacking,

Petrochemicals - High Density Polyethylene (HDPE), Polypropylene (PP), Poly Vinyl Chloride (PVC) Energy - Brent Crude Oil, Crude Oil, Furnace Oil, Middle East Sour Crude Oil, Natural

Gas

National Multi Commodity Exchange of India Limited (NMCEIL)

National Multi Commodity Exchange of India Limited (NMCEIL) is the first de-mutualised Electronic Multi Commodity Exchange in India. On 25th July 2001 it was granted approval by Government to organize trading in edible oil complex. It is being supported by Central warehousing Corporation Limited, Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got reorganization in Oct 2002. NMCEIL Head Quarter is at Ahmedabad.

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STRUCTURE OF COMMODITY MARKET

Ministry of consumer affairs

Forwards market commission

Commodity Exchange

National stock exchange

Regional stock exchange

NCD EX MCX NMCE NBOT

20 other regional

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GOLD
Gold is a chemical element with the symbol Au (Latin aurum, shining dawn) and an atomic number of 79. It has been a highly sought after precious metal for coinage, jewelry, in rocks, in veins and in alluvial deposits. Gold is dense, soft, shiny and the most malleable and ductile pure metal known. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Gold is one of the coinage metal and has served as a symbol of wealth and a store of value throughout history. Gold standards have provided a basis for monetary policies. It also has been linked to a variety of symbolisms and ideologies. A total of 158,000 tones (=8,333.33 cubic meters) of gold have been mined in human history, as of 2009. Modern industrial uses include dentistry and electronics, where gold has traditionally found use because of its good resistance to oxidative corrosion and excellent quality as conductor of electricity. For thousands of years gold served individuals as the most common medium of exchange. People began experimenting with convertible paper currencies backed by gold in the 1700 and 1800s. The international system of central bank managed gold-backed currencies that developed was called the gold standard. The shackles placed on central banks by the necessity of ensuring gold convertibility prevented them form issuing excess paper money to pay for government expenses, thereby causing inflation. The gold standard was dismantled and the shackles removed on the eve of World War I when most central banks removed gold convertibility, ostensibly to make it easier for them to finance war spending. After this, the world would experience some of the greatest inflations in history, including that Germany in the early 1920s the hardships experienced in the Great Depression and World War II kept the gold standard from being properly reconstructed. It was only after WWII that the worlds nations attempted to reconnect the international monetary system to gold. In the resulting Breton Woods system that developed, all currencies were fixed in price to the United States dollar, while the dollar itself was convertible by the worlds central banks into 0.028 ounces of gold ( 1 ounce was worth $35). The dollar had moved to the centre of the worlds monetary system, challenging gold.

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This shows the gradual unraveling of both the Breton Woods system and golds $35 fixed price, the end of dollar convertibility god, the elimination of gold as a monetary asset, and the emergence of todays system of freely floating competing currencies. Even though the dollar is no longer linked to gold, it has retained its position as the worlds pre-eminent medium of exchange. Till today 10 times more silver has been mined when compared to gold. On Ground availability pf Gold is five times more than that of silver.

History of Gold
A child finds a shiny rock in a creek, thousands of years ago, and the human race is introduced to gold for the first time. Gold was first discovered as shining, yellow nuggets. "Gold is where you find it," so the saying goes, and gold was first discovered in its natural state, in streams all over the world. No doubt it was the first metal known to early hominids. Gold became a part of every human culture. Its brilliance, natural beauty, and luster, and its great malleability and resistance to tarnish made it enjoyable to work and play with. Because gold is dispersed widely throughout the geologic world, its discovery occurred to many different groups in many different locales. And nearly everyone who found it was impressed with it, and so was the developing culture in which they lived Gold was the first metal widely known to our species. When thinking about the historical progress of technology, we consider the development of iron and copper-working as the greatest contributions to our species' economic and cultural progress - but gold came first. As far back as 3100 B.C., we have evidence of a gold/silver value ratio in the code of Menes, the founder of the first Egyptian dynasty. In this code it is stated that "one part of gold is equal to two and one half parts of silver in value." This is our earliest of a value relationship between gold and silver.

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In ancient Egypt, around the time of Seti I (1320 B.C.), we find the creation of the first gold treasure map now known to us. Today, in the Turin Museum is a papyrus and fragments known as the "Carte des mines d'or." It pictures gold mines, miners' quarters, road leading to the mines and gold-bearing mountains, and so on. Where is that gold mine located? Well, you know how it is with treasure maps - there's always something a little vague about them, to throw you off the trail. Modern thought is that it portrays the Wadi Fawakhir region in which the El Sid gold mine is located, but the matter is far from settled. Jason and the Argonauts sought the Golden Fleece around 1200 B.C. That Greek myth makes more sense when you realize that the fleece that it refers to is the sheep's fleece used in the recovery of fine placer gold. Early miners would use water power to propel gold-bearing sand over the hide of a sheep, which would trap the tiny, but heavy, flakes of gold. When the fleece had absorbed all it could hold, this 'golden fleece' was hung up to dry, and when dry would be beaten gently so that the gold would fall off and be recovered. This primitive form of hydraulic mining began thousands of years ago, and was still being used by some miners as recently as the California gold rush of 1849.

The first use of gold as money occurred around 700 B.C., when Lydian merchants produced the first coins. These were simply stamped lumps of a 63% gold and 27% silver mixture known as 'electrum.' This standardized unit of value no doubt helped Lydian traders in their wide-ranging

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successes, for by the time of Croesus of Mermnadae, the last King of Lydia (570 -546 B.C.), Lydia had amassed a huge hoard of gold. Today, we still speak of the ultra-wealthy as being 'rich as Croesus.' A monetary standard made the world economy possible. The concept of money, (i.e., gold and silver in standard weight and fineness coins) allowed the World's economies to expand and prosper. During the Classic period of Greek and Roman rule in the western world, gold and silver both flowed to India for spices, and to China for silk. At the height of the Empire (A.D. 98-160), Roman gold and silver coins reigned from Britain to North Africa and Egypt.

Money had been invented. Its name was gold.

Uses of Gold
Gold is an investment.

Since 2001, we have been in the early stage of a gold bull market. A young bull market is the investment opportunity of a lifetime. This asset class (precious metals) should vastly outperform traditional asset classes like stocks, bonds, real estate - for the next 5-10 years. All signs point to a continued upswing in gold prices. The reality is, gold responds well to currency debasement and monetary uncertainty.

Gold's Usefulness as safe haven. The geo-political and world economic structure is currently undergoing major change-some have even called the situation an "upheaval." This means that the investment outlook, particularly for certain parts of the world, is more unpredictable than usual. Under these circumstances, it is logical to conclude that certain investment portfolios should include real (non-paper) assets such as commodities for protection against a potential decline in the paper markets.

Gold's Usefulness as an Asset Diversifier Most portfolios are invested primarily in traditional financial assets such as stocks, bonds and mutual funds. Adding gold to a portfolio introduces an entirely different asset; a tangible or real asset, thus increasing the portfolio's degree of diversification. The purpose

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of diversification is to protect the total portfolio against fluctuations in the value of any one asset or type of asset. Gold does exactly that. The reason is basic

The economic forces which determine the price of gold are different from, and in many cases opposed to, the forces which determine the prices of most financial assets. The price of an equity depends on the earnings and growth potential of the company it represents. Likewise, the price of a bond depends on its safety, its yield, and the yields of competing fixed income investments.

Gold is money Gold is still the most important money in the world. Gold has been the ultimate store of value and currency for 4,000 years, outlasting all paper currency and fiat money. Stocks and bonds expire; governments come and go; but gold is forever. Gold has intrinsic value as a rare asset. Gold is precious. And what keeps it precious is that the total amount of gold in the world is a small quantity.

Gold is insurance.

Gold has always acted as portfolio insurance - protecting you against potential disaster of your financial assets. Gold is a hedge because it is negatively correlated to traditional financial assets. In other words, when paper assets go up - like, stocks and bonds gold goes down. And when paper assets go down, gold goes up. History has shown that a gold-hedged portfolio during uncertain financial and political times provides the ultimate insurance against potential economic calamity.

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SILVER
Silver is a metallic chemical element with the chemical symbol Ag (Latin: argentums, from the Indo European root * arg-for white or shining) and atomic number 47. a soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal. The metal occurs naturally in its pure, free from native silver, as an alloy with gold and other metals, and in minerals such as argentite and chlorargyrite. Most silver is produced as a by-product of copper, gold, lead, and zinc refining. Silver has long been valued as precious metal, and it is used to make ornaments, jewelry, highvalue tableware, utensils, and currency coins. Today, silver metal is also used in electrical contacts and conductor, in mirrors and in catalysis of chemical reactions. Its compounds are used in photographic film and dilute silver nitrate solutions and other silver compounds are used as disinfectants and micro biocides. While many medical antimicrobial uses of silver have been supplanted by antibiotics, further research into clinical potential continues. Many well known uses of silver involve its precious metal properties including currency, decorative items and mirrors. The contrast between the appearance of its bright white color in contrast with other media makes it very useful to the visual art. It has also long been used to confer high monetary value as objects (such as silver coins and investment bars) or make objects symbolic of high social or political rank. Silver, in the form of electrum (a gold-silver alloy), was coined to produce money in around 700BC by the Lydians. Later, silver was refined and coined in its pure form. Many nations used silver as the basic unit of monetary value. In the modern world, silver bullion has the ISO currency code XAG. The name of the United Kingdom monetary unit pound () reflects the fact that it originally represented the value of one troy pound of sterling silver. In the 1800s, many nations, such as the United States and Great Britain, switched from silver to a gold standard of monetary value, then in the 20th century to fiat currency.

History of silver
Silver has attracted mans fascination for many thousands of years. Ancient civilizations found silver deposits plentiful on or near the earths surface. Relics of these civilizations, include jewelry, religious artifacts, and food vessels formed from the durable, malleable metal. This metal took on

29

near mystical qualities in marking important historical milestones throughout the ages, and served as a medium of exchange. The Mesopotamian merchants were doing just that as early as 700 BC. In 1792, silver assumed a key role in the United States monetary system when Congress based the currency on the silver dollar, and its fixed relationship to gold. Silver was used for the nations coinage until its use was discontinued in 1965. The dawn of the 20th century marked an important economic function for silver, that of an industrial raw material. Today, silver is sought as a valuable and practical industrial commodity, as well as an appealing investment precious metal. Many countries now issue silver bullion coins, among them the Unites States, Canada and Mexico. Private issue silver bullion is also available from select private mints. Although silver is relatively scarce, it is the most plentiful and least expensive of the precious metals. The largest silver producing countries are Mexico, Peru, the United States, Australia and Chile. Sources of silver include; silver mined directly, silver mined as a by-product of gold, copper, lead and zinc mining, and silver extracted from recycled materials, primarily used photographic materials. Today, silver bullion stocks make up a significant component of silver supply. The American Eagle Bullion program was launched in 1986 with the sale of gold and silver bullion coins. Platinum was added to the American Eagle Bullion family in 1997. A bullion coin is a coin that is valued by its weight in a specific precious metal.

Silver Uses
Demand for silver is built on three main pillars: industrial and decorative uses, photography, and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption. In 2007, 455.5 million ounces of silver were used for industrial applications, while over 128 million ounces of silver were committed to the photographic sector, 163.4 million ounces were consumed in the jewelry market, and 58.8 million ounces were used in the silverware market. Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme

30

temperature ranges. Silvers unique properties restrict its substitution in most applications. Choose from the following list to learn more about some of the various applications of silver:

31

Traditional
o o

Coinage Photography

o o

Silver Jewelry. Silverware and Table Settings

Industrial
o o o

Batteries Bearings Brazing and Soldering

o o

Catalysts Electronics

Emerging
o o

Medical Applications Mirrors & Coatings

o o

Solar Energy Water Purification

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CHAPTER-3 INDUSTRY PROFILE &COMPANY PROFILE

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INDUSTRY PROFILE
Indian markets have recently thrown open a new avenue for retail investors and traders to participate in: commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, commodities are the best option. Till some months silver or oilseeds in the futures market. and silver as there was , with the now ago, this wouldn't have made sense. For retail investors could have done very little to actually invest in commodities such as gold and This was nearly impossible in commodities except for gold practically no retail avenue for punting in commodities. Whatever it may be

setting up of three multi-commodity exchanges in the country, retail investors can

trade in commodity futures without having any physical stocks

Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand the equity markets may find commodities an unfathomable market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. Like any other market, the one for commodity futures plays a valuable role in information pooling and risk sharing. The market mediates between buyers and sellers of commodities, and facilitates decisions related to storage and consumption of commodities. In the process, they make the underlying market more liquid The trading of commodities consists of direct physical trading and derivatives trading. The commodities markets have seen an upturn in the volume of trading in recent years. In the five year up to 2010, the value of global physical exports of commodities increased by 17% while the notional value outstanding of commodity OTC(over the counter) derivatives increased more than 500% and commodity derivative trading on exchanges more than 200%. The notional value outstanding of banks OTC commodities derivatives contacts increased 27% in 2010 to $9.0 trillion. OTC trading accounts for the majority of trading in gold and silver. Overall, precious metal accounted for 8% of OTC commodities derivatives trading in 2010, down from their 55% share a decade earlier as trading in energy derivatives rose.

Global physical and derivatives trading of commodities on exchanges increased more than a third in 2010 to reach 1,684 million contacts. Agricultural contacts trading grew by 32% in 2010, energy 29% and industrial metals by 30%. Precious metals trading grew by 3% with higher volume in New

34

York being partially offset by declining volume in Tokyo. Over 40% of quarter in China. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers.

Present scenario
Todays commodity market is a global market place not only for agricultural products, but also currencies and financial instruments such as Treasury bonds and securities futures. Its a diverse marketplace of farmers, exporter, importers, manufacturers and speculators. Modern technology has transformed commodities into a global marketplace where a Kansas farmer can match a bid from a buyer in Europe. The 2008 global boom in commodity prices- for everything from coal to corn was fueled by heated demand from the likes of China and India, plus unbridled speculation in forward markets.

The bubble popped in the closing months of 2008 across the board. As a result, farmers are expected to face a sharp drop in crop prices, after years of record revenue. Other commodities, such as steel, are also expected to tumble due to lower demand. This will be a rare positive for manufacturing industries, which will experience a drop in some input costs, partly offsetting the decline in downstream demand.

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COMPANY PROFILE COMPANY PROFILE

Reliance Capital, a constituent of CNX Nifty Junior and MSCI India, is a part of the Reliance Group. It is one of India's leading and amongst most valuable financial services companies in the private sector. Reliance Capital has interests in asset management, mutual funds, portfolio management services, pension funds, life and general insurance, private equity and proprietary investments, stock broking and depository services, investment banking, wealth management, home and commercial finance, financial products distribution, venture capital, exchanges, asset reconstruction and other activities in financial services. Reliance Capital, a constituent of CNX Nifty Junior and MSCI India, is a part of the Reliance Group. It is one of India's leading and amongst most valuable financial services companies in the private sector. Reliance Capital has interests in asset management and mutual funds; life and general insurance; commercial finance; equities and commodities broking; investment banking; wealth management services; distribution of financial products; exchanges; private equity; asset reconstruction; proprietary investments and other activities in financial services. Reliance Mutual Fund is amongst top two Mutual Funds in India with over six million investor folios. Reliance Life Insurance and Reliance General Insurance are amongst the leading private sector insurers in India. Reliance Securities is one of Indias leading retail broking houses. Reliance Money is one of Indias leading distributors of financial products and services. Reliance Capital, a constituent of CNX Nifty Junior and MSCI India, is a part of the Reliance Group. It is one of India's leading and amongst most valuable financial services companies in the private sector.Reliance Capital has interests in asset management and mutual funds; life and general insurance; commercial finance; equities and commodities broking; investment banking;

36

wealth management services; distribution of financial products; exchanges; private equity; asset reconstruction; proprietary investments and other activities in financial services.

Reliance Mutual Fund is amongst top two Mutual Funds in India with over six million investor folios. Reliance Life Insurance and Reliance General Insurance are amongst the leading private sector insurers in India. Reliance Securities is one of Indias leading retail broking houses. Reliance Money is one of Indias leading distributors of financial products and services. Reliance Capital has a net worth of Rs. 11,819 crore (US$ 2.2 billion) and total assets of Rs. Business mix of Reliance Capital Asset Management Mutual Fund, Offshore Fund, Pension fund, Portfolio Management Insurance Life Insurance, General Insurance Commercial Finance Mortgages, Loans against Property , SME Loans, Wealth Loans for Vehicles, Services, Loans for Construction Equipment, Business Loans, Infrastructure financing Equities, Commodities Products Private Equity, Institutional Broking, Asset Reconstruction, Venture Capital s ProfileShri Anil D. Ambani, regarded as one of the foremost corporate leaders of contemporary India, Shri Anil D. Ambani, is the Chairman of Reliance Capital Limited, Reliance Infrastructure Limited, Reliance Communications Limited and Reliance Power Limited. He is also on the Board of Reliance Infratel Limited and Reliance Anil Dhirubhai Ambani Group Limited. He is the President of the Dhirubhai Ambani Institute of Information and Communication Technology, Gandhinagar, Gujarat.An MBA from the Wharton School of the University of Pennsylvania; Shri Ambani is credited with pioneering several path-breaking financial innovations in the Indian capital markets. He spearheaded the countrys first forays into overseas capital markets with international public offerings of global depositary receipts, convertibles and bonds. Under his Chairmanship, the constituent companies of the Reliance Group have raised nearly US$ 7 billion from global financial markets in a period of less than 3 years. 37 and Derivatives, Management Portfolio Management Services, Investment Banking, Foreign Exchange, Third Party

Shri Ambani has been associated with a number of prestigious academic institutions in India and abroad.He is currently a member of :Wharton Board of Overseers, The Wharton School, USA Board of Governors, Indian Institute of Management (IIM),

AhmedabadExecutive Board, Indian School of Business (ISB), HyderabadIn June 2004, Shri Ambani was elected as an Independent member of the Rajya Sabha Upper House, Parliament of India, a position he chose to resign voluntarily on March 29, 2006.Select Awards and AchievementsAwarded by Light Readings as the Person of the Year 2008 for outstanding achievements in the communication industry. Voted 'the Businessman of the Year' in a poll conducted by The Times of India TNS, December, 2006.Voted the 'Best role model' among business leaders in the biannual Mood of the Nation poll conducted by India Today magazine, August 2006. Conferred 'the CEO of the Year 2004' in the Platts Global Energy Awards. Conferred The Entrepreneur of the Decade Award by the Bombay

Management Association, October 2002.

Home - About Us - Top Management Profile Reliance Capital is anchored by a team of experienced and committed visionaries who are dedicated towards scaling the company to greater heights through innovation and excellence; thereby creating value for all our stakeholders. Anup Rau - (Chief Executive Officer and Executive Director, Reliance Life Insurance) Asokan Arumugam (Head Compliance) Amitabh Mohanty (Head - Debt Strategy) Amit Bapna (Chief Financial Officer, Reliance Capital) Arun Hariharan (President, Quality and Knowledge Management, Reliance Capital) K. Achuthan (Chief People Officer, Reliance Capital)

38

K. V. Srinivasan (Chief Executive Officer, Reliance Commercial Finance) Lav Chaturvedi (Chief Risk Officer, Reliance Capital) Madhusudan Kela (Chief Investment Strategist, Reliance Capital) Rajnikant Patel (President and Chief Executive Officer, Reliance Spot Exchange) Sam Ghosh (Chief Executive Officer, Reliance Capital) Sanjay Jain (Chief Marketing Officer, Reliance Capital) Sundeep Sikka (Chief Executive Officer, Reliance Capital Asset Management) Rakesh Jain (Chief Executive Officer, Reliance General Insurance) Vikrant Gugnani (Chief Executive Officer, International Business- Reliance Capital) (Executive Director, Reliance Securities Ltd) V. R. Mohan (President and Company Secretary ) Reliance Capital Limited (RCL) was incorporated in year 1986 at Ahmedabad in Gujarat as Reliance Capital & Finance Trust Limited. The name RCL came into effect from January 5, 1995. In 2002, RCL shifted its registered office to Jamnagar in Gujarat before it finally moved to Mumbai in Maharashtra, in 2006. RCL entered the Capital Market with a maiden public issue in 1990 and in subsequent years further tapped the capital market through rights issue and public issues. The equity shares were initially listed on the Ahmadabad Stock Exchange and The Stock Exchange Mumbai. Presently the shares are listed on The Stock Exchange Mumbai and the National Stock Exchange of India. RCL in the initial years engaged itself in steady annuity yielding businesses such as leasing, bill discounting, and inter-corporate deposits. Later, in 1993 diversified its business in the areas of portfolio investment, lending against securities, custodial services, money market operations, project finance advisory services, and investment banking. RCL was accredited a Category 1 Merchant banker by the Securities Exchange Board of India (SEBI). It had lead managed/co-managed 15 issues of an aggregate value of Rs. 400 crore and had underwritten 33 issues for an aggregate value of Rs. 550 crore. All these companies were listed on various exchanges.

39

RCL obtained its registration as a Non-banking Finance Company (NBFC) in December 1998. In view of the regulatory requirements RCL surrendered its Merchant Banking License.

RCL has since diversified its activities in the areas of asset management and mutual fund; life and general insurance; consumer finance and industrial finance; stock broking; depository services; private equity and proprietary investments; exchanges, asset reconstruction; distribution of financial products and other activities in financial services. Reliance Capital's vision is that: By 2015, it will be a company that is known as: "The most profitable, innovative, and most trusted financial services

company in India and in the emerging markets". In achieving this vision, the company will be both customer-centric and innovation-driven.

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CHAPTER-4 DATA ANALYSIS

41

ANALYSIS AND INTERPRETATION

Success of any research is based on the analysis part. It shows the core theme of research and how it is done; any research is not completed without clear analysis and interpretation. Convincing and understanding capacity of a research is laid in this part. This research analyze the how gold and silver prices are fluctuate and what make them to change, through interpretation researcher gives a tips to overcome and predict future changes in gold and silver price

Gold performance during 2012

Gold prices are currently trading near their all time highs on global markets as concern over t he ability of several European countries to finance their debt burdens destabilized the euro and sharpened volatility across financial markets, fuelling an investor flight into the perceived safehaven asset. Golds gains were mainly imparted by weak dollar and uncertain economic conditions which prevailed during the 2010. Silver which is also known as poor mans gold is also trading near its 30 year high on international bourses tracking sharp moves in gold and base metal price as it is also used has an industrial metal. Weaker dollar spread billions alternative investment demand while concerns of faltering economic recovery strengthened metals safe haven appeal. A part from the lowering dollar index, strong investment demand was another major reason which took the gold price to new highs in 2010. Japan and USA continued to make gold an attractive investment. In particular, statements by federal reserve officials and discussion in previous policy meetings regarding their willingness to provide a more accommodative policy to spur economic growth and relating the labor market have put pressure on the US dollar, which increased long term inflation expectations and, consequently, due to its role has a hedging vehicle, pushed up the price of gold. Secondly officials sector activity continued to be supportive of the gold market has sales by European central banks remind negligible while in several emerging markets, including Russia, Bangladesh and Thailand , central bank continued to increase their gold reserves . Now has we are moving towards 2011, it would not be an easy task for us forecast or predicting the price of gold in coming period . The entire economy is similar to a living breathing organism with many complex parts. Isolating any one aspect is done with the risk of being inaccurate. So the price of gold is a difficult number to determine in the overall economic outlook. There is no definitive answer to where the price of gold will be in 2011 are prices have

42

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Year

Commodity Contract 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD 2012 GOLD

Traded Contracts (in Lots) 969584 853450 869808 607578 1019039 998315 928965 743139 928681 721539 869663 777848

INTERPRETATIONS Gold has always been considered a good hedge against inflation. Rising inflation rates typically appreciates gold prices. It has an inverse relationship with interest rates. As gold is pegged to the US dollar, US interest rates affect gold prices. Whenever interest rates fall, gold prices increase.

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Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Year 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012

Commodity Head SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER

Traded Contracts (in Lots) 10341744 9888776 9436061 7450288 10161467 10381524 7195472 7851970 9809020 6834511 8190656 7451629

INTERPRETATION:In the mid 2012 the price of gold is Rs 30170 but at the end of 2012 the market crosses Rs 31000 The price movements of different trading contract are not moved in the same manner mainly because of different maturity period. Each contract is affected by different price drivers based on the expiry date of contract. As compare to last year the movement of gold price is in positive way. The economy is in the recovery stage of great 2007-2008 depression so it indicator to development of the economy.

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SILVER
Trading system Trading hours Delivery unit Quality specification Quantity Variation No. of active contracts Delivery center Opening Date Due date Margin MCX's Trading System Trade timings on all trading days: Trading Hours : 09.55 a.m. 11.55 p.m. Single Call Market (Closing session) for determination of Closing Price:11.15 p.m. to 11.30 p.m. 30 kg List of approved refiners will be available with the Exchange and also on its web site: www.mcx.com None At any date, 3 concurrent month contracts will be active. There will be a total of twelve month contracts in a year. i.e. MarchMay- July. Mumbai Trading in any contract month will open on the 21st day of the month, 3 months prior to the contract month. 20th day of the delivery month, if 20th happens to be a holiday then previous working day 6.5%

SILVER MINI
Trading system Trading hours Delivery unit Quality specification Quantity Variation No. of active contracts Delivery center Opening Date Due date Margin MCX's Trading System Trade timings on all trading days: Trading Hours : 09.55 a.m. 11.55 p.m. Single Call Market (Closing session) for determination of Closing Price:11.15 p.m. to 11.30 p.m. 5 kg List of approved refiners will be available with the Exchange and also on its web site: www.mcx.com None At any date, 3 concurrent month contracts will be active. There will be a total of twelve month contracts in a year. i.e. MarchMay- July. Mumbai Trading in any contract month will open on the 21st day of the month, 3 months prior to the contract month. 20th day of the delivery month, if 20th happens to be a holiday then previous working day 6.5%

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PRICE DRIVERS
Drivers are those things that could materially affect either a company's earnings or the price of its stock. Every company will have its own unique drivers; although some of the most common drivers similarly in commodity market we can find some of core price drivers that lead the price of gold and silver in the market.

Price drivers of Gold:Assuming that the short-run price of gold is determined by supply and demand, it will fluctuate on a period-by-period basis in response to variables that alter the supply and/or demand for gold. We start by discussing factors that influence the short-run supply of gold. Central banks have been willing to lease gold since the early 1980s. Gold producers (i.e. mines) can implicitly supply their customers by leasing gold from central bank gold reserves, through a bullion bank intermediary, as well as extracting it from their mines. The quantity of gold supplied from extraction in any period is positively related to the gold price in an earlier period because there may be a substantial time lag before mines react to a price change. The quantity of gold supplied from extraction is also negatively related to the amount of extracted gold that is diverted to repay central banks for the gold leased in the previous period incremented by a physical interest rate in those cases where the central bank opts for interest to be repaid in gold. Therefore the total supply of gold to the market in each period from extraction is positively related to the lagged gold price, negatively related to the amount of gold leased in the previous period and negatively related to the gold lease rate in the previous period. There are two components to the short-run demand for gold. The first category consists of the use demand for jewellery, medals, electrical components etc. The use demand for gold is a negative function of the price of gold. The demand for jewellery is also affected by price volatility but the impact of this variable may be too short-term to this analysis. The second category is the asset demand for gold as an investment. This demand is based on a number of factors including dollar exchange rate expectations, inflationary expectations, fear, the returns on other assets and the lack of correlation with other assets.

Gold and Dollar rate

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There is a strong relationship between the gold and US dollar, mainly we see the inverse relationship between these two, AS per the analyst correlation between gold and the US dollar index is minus 0.42 over the last two years, minus 0.44 over the last nine years and minus 0.28 over the last 17 years. As a matter of fact, the two former periods and the last (current) one have something important in common, they saw the lowest (inverse) correlations with the currency. That is, they occurred when the U.S. dollar had reached some level of relative stability following a two-three year collapse in its foreign exchange rate Since we are still in the midst of the final period, I used the current gold and dollar price for the table, while measuring all the other periods from trough to peak.But if we take the high in gold prices last year as our peak, the gain in gold was actually 70%, and the U.S. dollar lost just 2% in this period Chart of Gold and US Dollar Relationship

By the above movement of gold we can clearly understand inverse relationship between these two, when gold dollar value decrease automatically the gold price increase because of devaluation of world currency. The current movement of gold shows that US dollar value is declining.

Gold and money supply

We analyze the impact that money supply has on the performance of gold, in a global context. There are two main reasons why there can be a surge in money supply. First, it can increase as a
47

consequence of economic growth which in turn may not result in higher inflation. Conversely, if central banks increase the money supply to induce growth as they have done as result of the financial crisis that started unfold in 2007 and too much money in introduced into the economy for too long, this may result in inflationary pressures, according to classic economic theories of monetarism. Intuitively, a positive relationship between money supply and gold can exist in either case. First, if money supply is accompanied by economic growth, the increase in wealth an access to capital can increase demand for luxury consumer goods, including gold. Second, as excess money enters the system and the economy remains stagnant, inflation pressures may prompt investors to safeguard their wealth by increasing their exposure to hard assets, such as gold. The system, peace time deficits will soon hit new record highs as a proportion of FDP and that alone is a strong enough argument for many to flock to hard assets.

Gold demand and supply

Supply demand is a major influencer, amid rising global investor demand,Gold mining is decreasing and the demand for gold is increasing. Gold supply has decreased by almost 40 per cent as the cost of mining, legal formalities and geographical problems have increased which has led to a fall in gold mining. Economics have taught us that lesser the supply, greater the demand and in turn greater the increase in price.

Gold guinea:Gold Guinea is a coin that was minted in the United Kingdom between 1663 and 1813, originally worth one English Pound sterling and weighing around 8.3-8.4 grams. The name was derived from Guinea in Africa, from where most of the gold used to make these coins originated. In the India

48

context, Gold Guinea refers to 8 gram gold coins of atleast 0.995 purity, which are mainly utilized as a retail investment. The demand for gold coins for retail investment is estimated to be around 35 tonnes in India and this is expected to grow at a rate of 40% in the coming years.

Performance of Gold guinea:The last month (March) performance of gold guinea can be understand by analyzing the gold guinea trading chart.

Contract Expiry Date:- 31st March 2012

Contract Expiry Date:- 30th April 2012

Contract Expiry Date: - 31st May 2012

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Analysis of Gold Guinea Monthly trading chart:As compare to gold, the market performance of gold guinea is not so familiar even though it has equal value of gold main. It has high volatility in the beginning of the month, at the month mid nearly 15 to 18th of March gold guinea went down, on the same time gold main was in bullish mood. This high volatility may be caused by number of factors but some core pricing drivers are as follows. An under supply of newly-mined gold. Gordon Brown striking out on his IMF gold sales proposal, with the US opposing it. The Washington Agreement supporting gold by being generally against excessive Central Bank gold sales. The real possibility of Asian countries buying whatever gold the European Central Banks dish up. The never-ending story of the US trade deficit. Gold is a "de facto currency" and therefore not subject to demand deficiencies caused by world wide economic slowdowns. Gold is an inflation fighter and they can see stagflation approaching.

50

 Now-a-days dollar is weakening day by day against other major currencies . India therefore purchased 200 metric tones of gold recently. Other countries also likely to take similar decision. Prices have moved sharper than it should have. It just because speculators moved it up up and up. Hence prices are expected to come down at faster space which happened in last few days just after Fed cut rate by 75 basis points. The situation in Libya, it seems quite bad and we see the flow of funds into safe-haven investment because of it, In addition to oil prices, other commodity that jumped due to crisis of Libya is gold. This precious metal prices jumped to 1% became U.S. $ 1,400 per ounce. Investors are competing to divert their investment to a safe place from inflation like gold. Every state in the world keeps its foreign reserves in the form of foreign currency i.e. $, Euro and pond. Gold is also taken as an asset in foreign reserve. Taking it as an asset was a tradition, very popular in the past that declined after the surge in value of dollar. Similarly the decline in the value of dollar gives rise to the demand of gold as a part of foreign reserves.

Interpretation:As commonly, fluctuations in the guinea market show that trading turnover of gold guinea. Gold main is probably show bearish only when international news spread out but gold guinea is the one commodity which is quickly response to both the national as well as international news. The most of the investor in gold guinea are big institutional investor so slight movement of gold guinea takes into deeper clash down of market.

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A Year performance of gold guinea:The bullion market movement can analyze by throw understanding of drivers which make volatile commodity market Contract Expiry Date:- 31st March 2011 Contract Expiry Date:- 30th April2011

Contract Expiry Date:- 31st May 2011

52

Analysis of yearly performance of gold guinea:The price movement of gold guinea was followed the price of gold main. In the month January the price of gold guinea is 16,000 but within the two month it was went up to Rs 17200.each gold guinea contract were moved in different way but all movement of this is most similar movement of gold main, as compare to gold main it is more volatile due to following factors. Bank failures When dollars were fully convertible into gold, both were regarded as money. However, most people preferred to carry around paper banknotes rather than the somewhat heavier and less divisible gold coins. If people feared their bank would fail, a bank run might have been the result. This is what happened in the USA during the Great Depression of the 1930s, leading Resident Roosevelt to impose a national emergency and to outlaw the ownership of gold by US citizens. Low or negative real interest rates. If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases. An example of this is the period of Stagflation that occurred during the 1970s and which led to an economic bubble forming in precious metal.
Currency fluctuation

As gold is pegged to the US dollar, it has an inverse relationship with the dollar. Right now with US being in great financial turmoil, the dollar has weakened against many other currencies. Dollar is expected to weaken further and prices of gold are expected to rise further. Dollar is a de-facto currency of exchange around the world. But now with US on the brink of depression, gold is substituted as a safe haven for investments. Though dollar seems to be getting stronger, it may be a temporary effect and very soon it can head southwards once again, in turn making gold an attractive and safe investment

53

 Higher inflation expectation

Regulators have pumped in huge amount of liquidity to avert recessions. During the political meeting held in London recently it was restated that G-20 countries intend to maintain loose money policies unit economies recover clearly. The rising inflation expectation benefits gold as gold is seen as a good hedge against inflation. War, invasion, looting, crisis In times of national crisis people fear that their assets may be seized and that the currency may become worthless. They see gold as a solid asset which will always buy food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises. Gloomy US dollar outlook Gold is traded in US dollar term but major consumption of gold is outside US. Hence weakening US dollars makes gold cheaper for Non- US investors and thereby increases demand for gold.

Increase in investment demand Gold has limited statistical correlation with any of the assets classes as factors driving gold prices are different from factors driving other markets. Hence gold acts as an excellent portfolio diversifier. The average share of gold in global portfolios is quite low and given the present fundamental setup it is undoubtedly going to go up, leading to higher gold demand. Again gold prices have exhibited astonishing performance during recent financial turmoil and that has managed to attract lot of investors attention. Such investors are investing in gold by way of exchange traded products and physical gold bars and coins. Interpretation:Gold guinea is the mid way between the gold main and gold mini, so its volatility is influenced by the enormous factors. The price of gold guinea will go up suddenly due to national and international events and here sentiment of investor play a major role .

Gold Mini:

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Gold is the oldest precious metal known to man and for thousands of years it has been valued as a global currency, a commodity, an investment and simply an object of beauty. Monthly trading chart of gold mini:Contract Expiry Date:- 5th april 2011 Contract Expiry Date:- 5th may 2011

Contract Expiry Date:- 4th June 2011

Analysis of monthly performance of Gold Mini:-

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Investment in the Gold mini gives us a confidential return with high volatility, from above chart we can clearly understand the price of gold mini is come down (20950 to20000),as compare to gold and gold guinea ,gold mini is moving in reverse manner, the reason for that is as follows. World oil price hikes will trigger inflation, which is currently a major concern of global investors.
Rising demand of gold jeweler.

The investments in gold are influenced by comparative returns from other markets like stock markets real estate other commodities like crude oil. Domestically, demand and consequently prices to some extent are influenced by seasonal factors like marriages. The rural demand is influenced by monsoon, agricultural output and health of the rural economy. price of gold is mainly affected by changes in sentiment, rather than changes in annual production. It's a natural hedge against the US dollar. It traded predominantly between $420 and $435 this year, thus setting a new price floor, which is considered a "strong buy signal. There are signs of inflation in the coming year or so, and again gold has been the commodity that people have tended use to act as a hedge against gold The primary factors include the value of your country's currency and other currencies around the world. The lack of confidence in the Euro is one reason why gold is going up now. Another factor is the overall confidence in the world economy. Interpretation:The last month performance of gold mini is not so satisfactory, gold mini was in bearish movement. The main reason for difference in movement of gold, gold guinea and gold mini is the pattern of investment by institution and individual. The individual investors are invest more in gold mini and their sentiment play vital role in market movement.

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A year performance of gold mini:Contract Expiry Date:- 5th April 2011 yearly Contract Expiry Date:- 5th May 2011

Contract Expiry Date:- 30th jun2011

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Analysis of yearly performance of gold mini:The present contract which is trading in bullion market shows a high volatility, In January the price of gold mini is Rs 20,600 but after two month the price is same. so we can say gold mini has high short term fluctuation. Some of reason for this fluctuation is as follows UK inflation has now out-run the Bank of England's official upper tolerance of 3.0% per year India is a country of contrasts where lavish palaces are mixed with shacks. Poorer layers

for 13 months running on the Consumer Price Index. of population prefer to keep their valuable assets in the form of gold jewelry so it can be easily carried in times of distress, floods and social unrest. Worlds overall economic situation is a very important factor influencing gold prices in India. With many European countries being on the brink of bankruptcy like Greece, for example, or facing huge state budget deficits, multiple investors see gold as the only worthy commodity worth investing. If the worlds gold price is on the rise, it automatically affects Indian price for gold. India is also worlds largest importer of gold from other countries. Rising or lowering import costs inadvertently affect gold price in India today. Rising population in India triggers even higher demand for gold driving gold price in India

today even higher.

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India is known to be a country of parallel economy, money laundering and large scale tax

evasions. Since this unaccounted money cannot be kept in banks and the value of national currency is on the downfall, Indians prefer to buy gold jewelry or gold bullions to protect them from devaluation. Interpretation:From last 12 month performance of Gold mini is quit critical to analysis, even though bullion market was in up word trend gold mini is not supporting to movement especially from the last six moth it has same price with little volatility so we can say the investor of gold mini are try to hold and they expect long term profit.

Silver performance during 2010:When it comes to silver also, India is the worlds #1 consumer as well. And it can be seen from imports figure which are up sharply in 2010, nearing 30-year peaks. All such factors shows that in spite of such high prices from these countries will continue to climb up, taking bullion prices to their new highs in 2011. While both the gold and silver are set to rise further owing to continued currency devaluation and enhancing physical demand, Silver is likely to out perform gold, in our view.Silver prices is reasonably tracks gold and are more volatile than the yellow metal. LIFE COMMODITY EXCHANGE MCX SILVER COMEX 5035.00 194.50 3069.00 1482.30 HIGH 45735.00 TIME LIFE LOW 7551.00 TIME 2010 HIGH 45735.00 2010 LOW 23610.00

However, silver is also dependent on industrial growth, and therefore, price advance may be limited if the global economic recovery is perceived to have stalled. Moreover, the nation has received abundant monsoon in 2010, which is likely to result in abundant harvesting and rising agricultural income. Silver is expected to see higher demand from rural India in medium term.

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Silver is also likely to attract greater attention from the fund community; particularly in the US. Owing to its out performance, the white metal is likely to receive more importance than gold. The worlds largest silver-backed exchange traded fund, ishares silver Trust said that its holdings hit record at 10,941.34 tones by December 7, 2010. Such strong fundamentals clearly shows us that there is still a long way to go for bullion in coming period as current economical environment is igniting up the heat in this counter.

Present performance of silver (2011):The silver is famously called poor mans gold, due to recovery of economy from great depression of 2007-08 silver performed well. These days enormous use of silver for different purposes from manufacturing to pharmaceutical industry made to silver hit 32 year hike in their price.

Last month performance of silver:Performance of silver is affected by various price drivers , the presently silver hits the 36 year records the reason for that level hike can be understand by analyzing the present performance of silver. Contract Expiry Date:- 5th May 2011 Contract Expiry Date:- 5th Jul2011

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Contract Expiry Date:- 5th Sep 2011

Analysis of last month performance of silver:The silver is increasing continuously from last few months due to various reasons, some of them are as follows Market demand for silver and gold is good, particularly industrial demand for Silver, but this is not enough to absorb all the supply, so that leaves the rest down to investor demand. Players have been joining in, and holdings of silver stock, the popular way for retail investors to participate, rose 59.9 tons Thursday, the biggest single inflow since late January. On the same day, holdings of Silver jumped 42 ton to another record at 15,554 tons. After a weak January, prices of the precious metals rose in February when the unrest that toppled governments in Tunisia and then Egypt sent players to havens.

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 Retail investors are showing particular interest in Silver coins in many countries, including the US. Last month the Utah State Legislature passed a bill accepting US Gold and Silver coins as legal tender and other States in the USA are considering similar legislation in a direct rebuke to the Federal Reserve and its ultra-loose monetary policy. Silver is more likely to follow gold higher, than base metals lower over the next year.

Interpretation:The present contract of silver performing well in the market, mainly because of increasing the silver use in various industries. The foreign market also in bullish trend that influencing performance of silver directly in the India. last month silver outperforming gold.

A year performance of silver:The current performance of silver is shown by below chart

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Contract Expiry Date:- 5th may 2011

Contract Expiry Date:- 5th jul2011

Contract Expiry Date: - 5th Sep 2011

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Supply of gold from last 5 year

Supply of Gold Mine production Net official sector sale Recycled gold Total

Tonnes 2209 234

Percentage 59% 6%

1323 3766

35% 100% Demand of gold from last 5 year

Demand of Gold investment Industry Jewelry Total

Tonnes Percentage

1182 433 2151 3766

31.38% 11.49% 57.11% 100%

Interest rates Gold has always been considered a good hedge against inflation. Rising inflation rates typically appreciates gold prices. It has an inverse relationship with interest rates. As gold is pegged to the US dollar, US interest rates affect gold prices. Whenever interest rates fall, gold prices increase. Lowering interest rates increases gold prices as gold becomes a better investment option vis-a-vis debt products that earn lower interest. Gold loses its shine in a rising interest rate scenario.

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Currency fluctuation As gold is pegged to the US dollar, it has an inverse relationship with the dollar. Right now with US being in great financial turmoil, the dollar has weakened against many other currencies. Dollar is expected to weaken further and prices of gold are expected to rise further. Dollar is a de-facto currency of exchange around the world. But now with US on the brink of depression, gold is substituted as a safe haven for investments. Though dollar seems to be getting stronger, it may be a temporary effect and very soon it can head southwards once again, in turn making gold an attractive and safe investment. Geo-political concerns Whenever there is geo-political strife, investors around the world rush to prevent erosion of their investments and gold as a safe haven attracts one and all. For example after 9/11 terror strike in the United States the demand for gold had increased. With the recent events like tension between IndiaPakistan, Israeli strikes over Gaza, the ongoing war in Iraq, the tension between US and Iran coupled with recession have investors scrambling for gold. Central bank demand With the dollar losing its value, central banks of most of the developed countries have started to increase their share of gold. This explains the increasing market demand for gold. Weakness in financial markets General rule of thumb in the market is that gold is always attractive when all other investments are unattractive. Why is this? As gold is negatively co-related to stocks, bonds, and real estate, gold is considered to be a safe haven and hence during any crises, investors would like to sell off what they would term as risky investments and be invest the funds in gold.

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PRICE DRIVERS OF SILVER

Silver has historically been a volatile choice for investing, but it is currently poised to drastically increase in price in the near future. It is not easy to understand everything that affects silver prices, but you could get an idea with a quick look at price history and the current uses for silver. By seeing where weve been and where we are now, you can get a better idea of where we might be going. Silver is one of the only precious metals that are affected by the law of supply and demand.

Gold to Silver ratio

Historically gold to silver ratio has been maintained between gold and silver where a certain amount of silver could buy 1 oz of gold. In fact a long time ago, there used to be a US law that fixed the gold silver ratio at 1:15, which then allowed 15 silver ounces to buy 1 ounce of gold. Since 1840, the gold to silver ratio has ranged from 1:15 to as high as 1:97. Todays gold to silver ratio sits at about 1:63. Many analyst believe that this ratio is currently out of whack and will return to historical levels which according Ted Butler and others has averaged 12-15 oz of silver to 1 oz of gold. If the ratio returns to historical levels it would require a substantial rise in the price of silver. At $1150 gold, silver would need to be around $76/oz.

Inflation Past and Future

Just as gold is a great inflation hedge, so is silver. As you know silver has been known as the poor mans gold. The dollar has lost over 98% of its value, Gold vs Dollar, What A Knock Out. This is just considering the inflation effect over the past 100 years or so, but what about right now and the near future? The erosion of dollar continues but at an accelerated pace not seen before in the history of this country, and thus makes it imperative to take the necessary precautions to protect the value of savings now. I have not seen anything more compelling than silver to protect and dramatically increase my wealth at the same time. The Federal Reserve is working overtime printing dollars and inflating the money supply which means every new dollar they create is taking away value from every one of the dollars in your pocket! This is where gold & silver really shine since this type of monetary expansion has always driven up the price of gold and silver historically. You can see just over the last year or two how the fed has really kicked it into overdrive. The inflationary effect of the spike you see on the graph has not yet

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hit, so it is still time to get positioned for the inflation tsunami and load up on silver while you can and while its still cheap.

INCREASING SILVER INDUSTRIAL & INVESTMENT DEMAND Last year global silver demand hit 888 million ounces, while worldwide mining production totaled only 680 million ounces, thus creating a 208 million ounce deficit. Many people dont know that silver is the most used commodity in industry next to oil. Industrial demand continues to pick up with new applications for silver coming to the market all the time, like silver zinc batteries. The silver zinc battery market alone is forecasted to be a large driver going forward for silver. If you are looking for more reasons, then how about Ten Thousand Reasons To Buy Silver, which goes into more detail about the numerous industrial applications that require silver.

Silver investment demand is on the rise as well and perhaps may soon surpass that of industrial demand. Just like people are turning to gold in the great flight to quality, silver is also starting to attract demand from investors. One of the biggest wildcards in the mix is China. Until recently, the chinese government did not allow its citizens to buy precious metals. They have done a complete reverse and now highly encourage all of their 1.3 billion citizens to buy, buy, buy. Dont forget about their neighbors, you know, the other country that has a 1 billion plus people in it, India. The Indians have a long history and tradition of buying both gold and silver. I believe silver demand in India will increase as the price of gold rises .The Real Silver Advantages: Leverage & Availability Since more people are waking up and running to gold for asset protection due to the erosion of the dollar and other fiat currencies, gold will naturally not be as affordable as silver. One could argue that we have already reached this point. People will come to reason that they can get the same level of protection as purchasing gold, but at a more affordable price by purchasing silver instead. The late comers to the party, who missed out on the chance to buy gold when it was only $250/oz will want the next best thing which is silver. Likewise, many investors will also see that they can get a much higher leverage on purchasing silver. So if gold is starting to get too expensive for your wallet, then

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why not get some leverage by purchasing silver? The best times to buy is whenever the prices are falling. Since you get way more ounces of silver for your money than gold, you naturally get more leverage. Leverage coupled with a great investment, equals great profits.

Dwindling Silver Stock Piles

Going back in history, governments around the world use to have huge silver stock piles. Around the 1950s, the US government alone had 3.5 billion ounces of silver, the largest stock pile in history. Since then according to the CPM group, just about all of these stock piles have been sold off/consumed. The CPM data shows that world silver stock piles have gone from over 2 billion ounces in 1990 to under 300 million ounces in 2007. Furthermore, silver demand has outpaced silver production by 156% annually for 19 consecutive years. According to Ted butlers article, Why Silver is More Valuable Than Gold, more silver has been consumed than produced for over 60 years now. Available silver stockpiles have tanked to an estimated 140 million ounces or only a four-month supply of silver! No matter whose estimates you believe, the real point to get from all of this is that the quantity of silver has been disappearing at an alarming rate while demand is substantially increasing. Conditions are ripe for a shortage . Silver Leasing

According to Ted Butler in his article, Silver Leasing or Silver Fleecing, there are/were about 150 million ounces of gold and about 1 billion ounces of silver that have been leased out. What doe this mean? It means that some gold & silver producers at one time or another did not have enough gold or

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silver to sell to their customers, so they leased (borrowed) the metals from others (like central banks) that had ample supplies at the time. The producers then would sell these metals to their customers.

The leasing created a phantom supply of gold and especially silver. The problem here is, all of this leased gold and silver has to eventually be produced or paid back. It is the equivalent of borrowing money and living off of it with the plan of paying it back at some point in the future. The problem is, when pay back comes you have to come up with the borrowed money and you still have to come up with additional money to continue to live off of. So the 1 billion ounces of silver has to be produced/repaid at the some point, all the while silver demand continues to increase along with yearly silver deficits.

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CHAPTER-5
FINDINGS, SUGGESTIONS, CONCLUSIONS

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FINDINGS
Commodity market is one of the budding markets especially in India. It has a wide scope to develop because India is country which grows large number of commodity and metal which can be traded in the commodity market. There is a lack of awareness and education about the commodity market in India as compare to equity market. The forward market commission and SEBI is the present regulating body of Commodity market but it requires a single focused governing body to control, manage, and stimulate legal aspect of commodity trading. Devaluation of US dollar, Inflation, Demand and supply are the main price drivers of bullion market. Because of change in these factors bullion market creates new history in the market price of gold and silver. There is a close relationship between the price movement of gold and silver. If gold price increase, silver price also moved in the same direction because both are affected by same price drivers.
Most of the commodity which is traded in the Indian commodity markets is based on three to

six month contract.If the commodity contracts become default, the loss will be entered on the expiry date of contract itself.
The gold price is in hike due to fear of future inflation and hedging strategy. As per analyst it

will further goes up, so this is a right time to invest in gold.

As compare to Gold, Gold guinea and Gold mini has high volatility in price. Mainly because

of difference in investment pattern, in gold Govt and institutional investor play a major role but in the case of gold guinea and gold mini individual investor play a major role that makes more volatility in these two.
Silver is one of the new commodity added in the market, today market for silver is hyped its

only because of more demand for silver at the global level.

Silver demand increased mainly due to finding the new uses of silver and new silver

consuming projects like solar energy, nuclear plant, medical and water purification.

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SUGGESTIONS:
Commodity market is a new concept to Indian investor, there should be a clear education and

awareness required to developing and guiding the investor about commodity market and concerned authority should take initiation to marketing this investment instrument appropriately. Today if an investor want to enter in to a commodity market he should invest a minimum amount which is proscribed by concern commodity exchange but this limit create a barrier to entry. Especially in gold and silver they should invest a minimum lum-sum amount which is not affordable to small investor so if minimum investment is reduced to some extent that might help to more people invest in commodity. In India commodity market is growing at present so it is a better time to one should trade in exchange traded market rather than the OTC market.

As compare to equity market, there is a volatility in commodity market, this was saying

best suit during 19th century but today because of gold and silver commodity market has equal volatility as equity market. So its better to follow hedging in commodity market. It is not necessary that one must be educated to invest in commodity futures. So, it is recommended that those who are not so informed can also invest in commodity futures.
It is recommended that now a days investor should invest in agriculture commodity because

within the few days some of agriculture commodity is coming up with huge quantity.

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CONCLUSION
After almost two years that commodity trading is finding favor with Indian investors and is been seen as a separate asset class with good growth opportunities. For diversification of portfolio beyond shares, fixed deposits and mutual funds, commodity trading offers a good option for long-term investors and arbitrageurs and speculators. And, now, with daily global volumes in commodity trading touching three times that of equities, trading in commodities cannot be ignored by Indian investors. Online commodity exchanges need to revamp certain laws governing futures in commodities to make the markets more attractive. The national multi- commodity exchanges have unitedly proposed to the government that in view of the growth of the commodities market, foreign institutional investors should be given the go-ahead to invest in commodity futures in India. Their entry will deepen and broad base the commodity futures market. As a matter of fact, derivative instruments, such as futures, can help India become a global trading hub for select commodities. Commodity trading in India is poised for a big take-off in India on the back of factors like global economic recovery and increasing demand from China for commodities. Considering the huge volatility witnessed in the equity markets recently with the Sensex touching Rs 21000 level commodities could add the required zing to investors' portfolio. Therefore, it won't be long before themarket sees the emergence of a completely redefined set of retail investors. As majority of Indian investors are not aware of organized commodity market; their perception is of risky to very risky investment. Many of them have wrong impression about commodity market in their minds. It makes them specious towards commodity market. Concerned authorities have to take initiative to make commodity trading process easy and simple. Along with Government efforts NGOs should come forward to educate the people about commodity markets and to encourage them to invest in to it. There is no doubt that in near future commodity market will become Hot spot for Indian farmers rather than spot market. And producers, traders as well as consumers will be benefited from it. But for this to happen one has to take initiative to standardize and popularize the Commodity Market.

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BIBLOGRAPHY
Books Research Methodology by C.R. KOTHARI, 2nd edition.

WEBSITE

www.google.com www.sebiindia.com www.bseindia.com www,jmfinancial services.com

www.mcx.com

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