INTERNATIONAL

FINANCE
TOPIC:
GOLD EXPORTS
 Gold & India
• INDIA is the largest consumer of gold.

• World's largest trading centre

• Growth of 38.15% in India Gem’s and

Jewellery.

• Gold Bar Exports registered a growth of

1.28 percent with exports recorded at $
3861.57 million in fiscal 2007-08 as
compared to $ 3812.88 million in financial
2006-07.
• Top export markets for the Indian
Gem and Jewellery products
 The United States – 28%
 Hong Kong – 21 %
 UAE – 15%
 Singapore – 9%
 Belgium – 8%

– Gold is the only form of international

monetary reserves, hence a balance-of-
payments deficit (surplus) causes gold
outflow (inflow)

– Country must guarantee complete back-

up of domestic currency with gold
Balance-of-Payments Adjustment
Mechanism Under Gold Standard
Fall in prices Unchanged
in the USA prices abroad

Surplus in the US balance-

Increase in US Increase in foreign
exports, fall in US of-payments, accompanied exports, fall in
imports imports
by net gold inflow from abroad
Increase in the
supply of money in Fall in the foreign
the USA supply of money
Increase in Fall in foreign
the US prices prices

Fall in US exports, Balance-of-payments Increase in foreign

increase in US equilibrium exports, fall in
imports No more gold flow foreign imports
History of Gold Prices
 Procedure for Export of
Gold
The shipping bill and the invoice along with
packing list presented to the authorized
officer shall contain the following:
(a) Description of the items;
(b) Weight and purity of Gold or Silver or
Platinum
(c) Free on board price rate of the
jewellery item and quantity in pieces and
the total value.
ii. The Unit may export jewellery on the
basis of a notional rate certificate
The date of shipment should not
precede by more than three working
days or as may be notified by Central
Government.

iii. The Unit obtaining gold or silver or

platinum from the Nominated Agency
on loan basis shall export gold or silver
or platinum jewellery within the period
prescribed for the same under the
Foreign Trade Policy.
iv. In the case of export of jewellery on the
basis of notional rate certificate issued by the
Nominated Agency, the Unit may fix the price
and repay the gold loan within the prescribed
period for export as may be notified by the
Central Government from time to time.
 Company Profile
• Name : Global Air Exports , Andheri
(east).

• Registered with Bullion Trading

Association.

• Major Exporter of Gold Bars and Cut

Diamonds

• Major Exports to U.A.E.

 The Question’s.......
• Commodity dealt with.

• Major concentration – Export / Import.

• Major countries (Clients / Customers).

• Risks involved in export of gold and

exchange rate fluctuations.

• Effect of rise in gold prices.

• Impact of Recession on trade of gold.

 Questions contd…..

• Usage of and risk involved in

Letter of Credit

• GR Form

• Involvement of confirming bank

• Government rules and regulations

 ANALYSIS
• Export’s:
– Cut & Polished diamonds,

– Precious & semi- precious stones,

– Plain & studded Gold Jewellery and Gold

bars.
MAJOR CLIENTS

U.A.E
U.S.A
E.U
FAR EAST & REST
• Risk involved- volatility of price
fluctuations.

• Demand for gold reduced by 20-25%

in the last fiscal year.

• Studded Jewellery movement has not

been affected to a great extent.

• Plain gold (gold bars), the demand has

reduced.
 Gold in Recession

•As economic woes deepen, increasing numbers of consumers

are seeking to cash in their idle assets including jewellery.
•Many grooms used to give brides rings, earrings, necklaces
and bracelets. Now more couples are exchanging wedding
rings only.
• All bills are on D/A or C.O.D basis.

• All of the precious cargo shipment is

done through Diamond Plaza Custom
Clearance (DPCC).

• Use of GR form for regulating foreign

exchange currency.

• Confirming banks - Authorized

Dealers (ADs) with foreign exchange
branches abroad.
Forward rates
 Arbitrage
• Buy gold (oz)
In INDIA @ INR 47,064*

• Sell gold (oz)

In US @ USD 916.4* i.e INR 47,093

*(Gold rates as on 12/03/2009)

 Arbitrage
Forward rate arbitrage
Spot Rs.15,000
Fwd Rs.16,000
1. Sell gold @ Rs.16,000 (fwd)
2. Borrow Rs.15,000 @ 5%
3. Purchase gold @ spot 15,000
4. Deposit gold @ 3%
On Maturity

1. Pay back loan with interest Rs.15,750

2. Receive accrued interest on deposit
Rs.450
3. Deliver gold for Rs.16,000

Hence ,earn profit of Rs.700

 Today's Prices
• Exchange Rate : USD 51.43

• Gold (Rs/10grms): 15,185.00

‘Gold’en Future
• Gold price to skyrocket..

• Inverse relation of USD & gold price

• India’s tradition
 Bibliography

• Global Air Exports, Andheri (East)

• Mr. Jimmy Driver
• World Gold Council
• www.Goldprice.in
• www.Amazon.com