Shabnam SIP Finl

8/2/2019 Shabnam SIP Finl

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Performance of Precious Metals in Commodity Market

1

Bhagavan Mahavir College of Management

1.1 INDUSTRY PROFILE

What is commodity?Commodity may be defined as an article, a product or material that is

bought and sold. It can be classified as every kind of movable property,

except actionable claims, money and securities.

The Indian economy is witnessing a mini revolution in commodity

derivatives and risk management. Commodity option trading and cash

settlement of commodity futures had been banned since 1952 and until

2002 commodity derivatives market was virtually nonexistent.

Commodity Derivatives An Overview: The history of organized commodity derivatives in India goes back to the

nineteenth century when the Cotton Trade Association started futures

trading in 1875, barely about a decade after the commodity derivatives

started in Chicago. Over time the derivatives market developed in several

other commodities in India. Following cotton, derivatives trading started in

oilseeds in Bombay (1900), raw jute and jute goods in Calcutta (1912),

wheat in Hapur (1913) and in Bullion in Bombay (1920).

However, many feared that derivatives fuelled unnecessary speculation in

essential commodities, and were detrimental to the healthy functioning of

the markets for the underlying commodities, and hence to the farmers. Witha view to restricting speculative activity in cotton market, the Government of

Bombay prohibited options business in cotton in 1939. Later in 1943,

forward trading was prohibited in oilseeds and some other commodities

including food-grains, spices, vegetable oils, sugar and cloth.


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After Independence, the Parliament passed Forward Contracts (Regulation)

Act, 1952 which regulated forward contracts in commodities all over India.

The Act applies to goods, which are defined as any movable property otherthan security, currency and actionable claims. Under the Act, only those

associations/exchanges, which are granted recognition by the Government,

are allowed to organize forward trading in regulated commodities. The Act

envisages three-tier regulation:

1.The exchange which organize forward trading in commodities canregulate trading on a day-to-day basis;

2.The Forward Markets Commission provides regulatory oversightunder the powers delegated to it by the central Government, and

3.The Central Government - Department of Consumer Affairs, Ministryof Consumer Affairs, Food and Public Distributionis the ultimate

regulatory authority.


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Structure of commodity market:

Ministry of Consumer Affairs, Food and

Public Distribution

FMC

Regional

Exchanges (22)

National

Exchanges

MCX NCDEX NMCE


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Government Policy:After, the Indian economy embarked upon the process of liberalization and

globalization in 1990, the Government set up a Committee in 1993, toexamine the role of futures trading. The Committee (Headed by Prof. K.N.

Kabra) recommended allowing futures trading in 17 commodity groups. It

also recommended strengthening of the Forward Markets Commission, and

certain amendments to Forward Contracts (Regulation) Act 1952,

particularly allowing options trading in goods and registration of brokers

with Forward Markets Commission. The Government accepted most of these

recommendations and a future trading was permitted in all recommended

commodities.

Commodity futures trading in India remained in a state of hibernation for

nearly four decades, mainly due to doubts about the benefits of derivatives.

Finally a realization that derivatives do perform a role in risk management

led the government to change its stance. The policy changes favoring

commodity derivatives were also facilitated by the enhanced role assigned to

free market forces under the new liberalization policy of the Government.Indeed, it was a timely decision too, since internationally the commodity

cycle is on the upswing and the next decade is being touted as the decade of

commodities.

Requirements of Commodity Derivatives:India is among the top-5 producers of most of the commodities, in

addition to being a major consumer of bullion and energy products.

Agriculture contributes about 22% to the GDP of the Indian economy. It

employees around 57% of the labor force on a total of 163 million

hectares of land. Agriculture sector is an important factor in achieving a


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GDP growth of 8-10%. All this indicates that India can be promoted as a

major center for trading of commodity derivatives.

It is unfortunate that the policies of FMC during the most of 1950s to

1980s suppressed the very markets it was supposed to encourage and

nurture to grow with times. It was a mistake other emerging economies

of the world would want to avoid. Derivatives are used to reduce or

eliminate price risk arising from unforeseen price changes. A derivative is

a financial contract whose price depends on, or is derived from, the price

of another asset.

Two important derivatives are futures and options.

a) Commodity Futures Contracts:A futures contract is an agreement for buying or selling a commodity for a

predetermined delivery price at a specific future time. Futures are

standardized contracts that are traded on organized futures exchanges that

ensure performance of the contracts and thus remove the default risk. The

commodity futures have existed since the Chicago Board of Trade (CBOT,

www.cbot.com) was established in 1848 to bring farmers and merchants

together. The major function of futures markets is to transfer price risk from

hedgers to speculators.

b) Commodity Options contracts:Like futures, options are also financial instruments used for hedging and

speculation. The commodity option holder has the right, but not the

obligation, to buy (or sell) a specific quantity of a commodity at a specified

price on or before a specified date. Option contracts involve two partiesthe

seller of the option writes the option in favor of the buyer (holder) who pays

a certain premium to the seller as a price for the option. There are two types


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of commodity options: a call option gives the holder a right to buy a

commodity at an agreed price, while a put option gives the holder a right to

sell a commodity at an agreed price on or before a specified date (calledexpiry date). The option holder will exercise the option only if it is beneficial

to him; otherwise he will let the option lapse.

Indian Commodity Exchanges:To make up for the loss of growth and development during the four decades

of restrictive government policies, FMC and the Government encouraged

setting up of the commodity exchanges using the most modern systems and

practices in the world. Some of the main regulatory measures imposed by

the FMC include daily mark to market system of margins, creation of trade

guarantee fund, back-office computerization for the existing single

commodity Exchanges, online trading for the new Exchanges,

demutualization for the new Exchanges, and one-third representation of

independent Directors on the Boards of existing Exchanges etc.

Responding positively to the favorable policy changes, several, Nation-wide

Multi-Commodity Exchanges (NMCE) have been set up since 2002, using

modern practices such as electronic trading and clearing. The new

commodity exchanges in India are

1. National Commodity And Derivative Exchange (NCDEX)

2. Multi Commodity Exchange (MCX)

3. National Multi-Commodity Exchange of India Limited (NMCEIL)


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I. National Commodity & Derivatives Exchange Limited(NCDEX) :

National Commodity & Derivatives Exchange Limited (NCDEX) located in

Mumbai is a public limited company incorporated on April 23, 2003 under

the Companies Act, 1956 and had commenced its operations on December

15, 2003.This is the only commodity exchange in the country promoted by

national level institutions. It is promoted by ICICI Bank Limited, Life

Insurance Corporation of India (LIC), National Bank for Agriculture and

Rural Development (NABARD) and National Stock Exchange of India Limited(NSE). It is a professionally managed online multi commodity exchange.

NCDEX is regulated by Forward Market Commission and is subjected to

various laws of the land like the Companies Act, Stamp Act, Contracts Act,

Forward Commission (Regulation) Act and various other legislations.

II. Multi Commodity Exchange of India Limited (MCX):Headquartered in Mumbai Multi Commodity Exchange of India Limited

(MCX), is an independent and de-mutualized exchange with a permanent

recognition from Government of India. Key shareholders of MCX are

Financial Technologies (India) Ltd., State Bank of India, Union Bank of

India, Corporation Bank, Bank of India and Canara Bank. MCX facilitates

online trading, clearing and settlement operations for commodity futures

markets across the country.

MCX started offering trade in November 2003 and has built strategic

alliances with Bombay Bullion Association, Bombay Metal Exchange,

Solvent Extractors Association of India, Pulses Importers Association and

Shetkari Sanghatana.


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III. National Multi-Commodity Exchange of India Limited(NMCEIL):

National Multi Commodity Exchange of India Limited (NMCEIL) is the first

de-mutualized, Electronic Multi-Commodity Exchange in India. On 25th

July, 2001, it was granted approval by the Government to organize trading

in the edible oil complex. It has operationalized from November 26, 2002. It

is being supported by Central Warehousing Corporation Ltd., Gujarat State

Agricultural Marketing Board and Neptune Overseas Limited. It got its

recognition in October 2002.

Features of Commodity Market:Features of emerging trend in India as far as the commodity market is

concerned are as under :

1) Expansion of commodity trade:Very clearly, trade volumes are set to expand rapidly. Demand for a wide

variety of commodities covering food, fiber, metals and energy is certain to

expand. India is likely to produce many of the aforesaid commodities,as

investment in production facility expands. If demand growth outstrips

domestic supply growth, imports will become inevitable. The possibility

exporting certain commodities also exists. In commodity production,

consumption and trade, India will become an important player in the

international market. This will lead to a massive expansion in commodity

trade volumes over the next, say, 15-20 years.


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2) Competition from imports:Whether or not domestic producers like it, the competition from imported

commodities is inevitable. This could be true in case of food crops, metals

and energy. In the short/medium-term, indigenous output will trail

consumption demand because of the lagged effect of investment. To fuel

growth and rein in inflation, the government and the business houses will

have to resort to imports. As imports are unrestricted (Quantitative

Restrictions have been abolished), there will be liberal inflow of goods from

abroad. Often, imports from developed countries are low-priced and

subsidized. Such competition will result in inefficient domestic units falling

by the wayside, but will eventually lead to greater efficiency among domestic

producers.

3) Role of MNCs:Multinational corporations cannot be wished away. They bring with them a

certain superior knowledge of operating in developing or emerging

economies. They also have deep pockets and, often, are long-term players.

In the Indian commodities sector, global companies will increasingly play a

role as producers, suppliers, traders and service providers. Indian

producers will have to learn to face competition from MNCs.

4) Consolidation of fragmented capacities:It is well-known that commodity producers and industrial consumers in

India suffer poor scale economies because of their small size. Fragmentation

of business that is resulting in scale-diseconomies and other infirmities is

likely to give way to consolidation. Competition is now driving smaller

players to explore opportunities for merger. Bigger companies with


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Several corporate have already begun to employ IT to derive value, ITC's e-

chapel being a remarkable initiative.

Benefits to Traders, Industrialist and Consumer:1. Commodities can be traded with only margin amount instead of giving

the contract / whole price.

2. One can sell the commodities that he buys from a ready / spot marketand can protect himself from loss happening from fall in prices.

3. For those who have kept their commodities in the central warehouse,loans are available on the basis of the stock.

4. More choice of commodities to trade which was previously impossibledue to geographical reasons.

5. Inventory planning and other activity can be scheduled by knowingthe prices in advance.

6. One can be sue that the commodity is available when they require it.7. One can buy goods without agents.8. Assured quality of the commodities.9. Domain knowledge to trade in commodities helps to take sound

decisions.

Benefits of Commodities Futures Market:1. Long term benchmark and price discovery.2. Real time commodity prices for price fixing.3. Enabling decisions on crop sowing and time of sale.4. Increased bargaining power of farmers.


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5. Promoting gradation and quality of certification.6. Promoting storage and logistics facilities.7.

Promoting warehouses receipts and financing.

8.Trade and payment guarantee with no counter party and quality risk.

Types of Commodities

Plantation Products Polymers

Pules Metals

Cereals Energy

Spice Precious metals

Fibers

Oil & Oilseeds

Products of commodity market

Agriculture-

commodity

OthersNon-Agriculture

commodit


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A.Agriculture Products :1.Plantation Products

Rubber

Coffee Robusta

Cashew2.Pulse

Chana

Masoor

Yellow Peas3.Cereals

Wheat

Barley

Maize4.Spice

Pepper

Turmeric


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Jeera

Chili

Coriander5.Fibers

Indian 28.5mm Cotton

V-797 Kapas

Raw jute6.Oil & Oilseeds

Castor seedSeame seedCotton seed oil cakeSoy complex

Mustard complexPalm complex


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B.Non-Agriculture Products :1 Polymers

Polypropylene

Linear low densityPolyethylene

Polyvinyl chloride2 Metals

Steel

Copper

Zinc

Aluminum

Nickel3 Energy

Crude oil

Furnace oilThermal coalBrent crude oilNatural gas


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4 Precious Metals

Gold

Silver

PlatinumC.Others Products :

Guar seedGuar gumPotato

Sugar

Menthe oil


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Introduction about Gold

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.

Major Characteristics : Gold is unique as it is both a commodity and a monetary

asset.

Its stability and high value makes it virtually indestructibleand ensures that it is almost always recovered and recycled.

There is no true consumption of gold in the economic senseas the stock of gold remains essentially constant while

ownership shifts from one party to another.

Although gold mine production is relatively inelastic, recycledgold (or scrap) ensures there is a potential source of easily

traded supply when needed, and this helps to stabilise gold

price.

Economic forces that determine the price of gold are differentfrom, and in many cases opposed to the forces that influence

most financial assets.


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Global Supply Demand Scenario : The total above ground stocks of gold is estimated to be

around 1,63,000 tonnes by Gold Fields Minerals Services

(GFMS) as on end of 2008 .

Out of this total stock, 51% is estimated to be present as jewellery, 18% as official reserves, 17% held as investment,

12% used for industrial purposes and 2% is unaccounted for.

Jewellery accounts for almost two-thirds of annual golddemand with investment and industry being the other main

drivers. The total annual global demand for gold has averaged

3530 tonnes in the last three years (2005 - 2008). However, it

is expected to dip slightly in 2009, owing to the sharp rise in

prices.

Five countries, viz., India, China, USA, Turkey, Saudi Arabiaand UAE account for above 60% of gold demand, with each

market driven by a different set of socio-economic and

cultural factors.

The total global mine production is relatively stable, averagingapproximately 2,455 tonnes per year over the last three

years. Recycling of old gold scrap and official sector sales are

the other major sources of supply, which have averaged 1084

tonnes and 378 tonnes in the last three years.

South Africa has been a major gold producer since 1880s andit is estimated that about 50% of all gold ever produced has

come from this nation. While, during the early 1980's it

produced about 1000 tonnes, the output in 2007 dropped to

just 272 tonnes.


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China with a production of 276 tonnes, overtook South Africaas the world's largest gold producer in 2007 for the first timesince 1905 that South Africa has not been the largest. The

other major producers are USA, Australia, Russia and Peru.

World Gold Markets :OTC markets at London (LBMA), New York and Zurich

Gold derivative exchanges at New York CME (COMEX), Tokyo

(TOCOM),Mumbai(MCX) , Istanbul, Dubai, Hong Kong and Singapore

are doorways to important consuming regions .

India in World Gold Industry

(Rounded Figures) India (In Tons) World (In Tons) % Share

(Rounded Figures) India (In Tons) World (In Tons) % Share Total Stocks 15000 160000 9Central Bank holding 558 30,100 2Annual Production 3 2450 0Annual Recycling 250 1100 23Annual Demand 700 3550 20Annual Imports 600 --- ---Annual Exports 60 --- ---


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Indian Gold Market : India is the world's largest consumer of gold. Indians normallybuy about 25 per cent of the world's gold, purchasing around

700 - 750 tonnes of gold every year.

However, the sharp price increase in 2008 and 2009 hasimpacted demand with total demand in 2008 dipping to 660tonnes. It is further expected to shrink in 2009 with demand infirst three quarters of 2009 totaling only around 265 tonnesagainst 553.5 tonnes in the same period of the previous year.

As India's domestic primary production of gold is very less, ataround 2-3 tonnes a year, the country imports most of itsdomestic requirement.

Thus, India is also the largest importer of the yellow metal andhas averaged imports of around 600 tonnes a year. However,2008 imports dipped to around 400 tonnes of gold and it isfurther expected to dip to around 200-220 tonnes in 2009 owingto high prices.

India's gold demand is firmly embedded in cultural and religioustraditions. It is also valued in India as a savings and investmentvehicle and is the second preferred investment after bankdeposits.

Gold hoarding tendency is well engrained in the Indian societyand unofficial stocks held by Indians is estimated to be wellabove 15,000 tonnes, which is around 9% of the total global goldstocks.

Domestic consumption is dictated by monsoon, harvest andmarriage season. Indian jewellery off take is sensitive to priceincreases and even more so to volatility.

In the cities gold is facing competition from the stock market anda wide range of consumer goods.

Facilities for refining, assaying, making them into standard bars,


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coins in India, as compared to the rest of the world, areinsignificant, both qualitatively and quantitatively.

In July 1997 the RBI authorized the commercial banks to importgold for sale or loan to jewellers and exporters. At present, 13banks are active in the import of gold. This reduced the disparitybetween international and domestic prices of gold from 57percent during 1986 to 1991 to 8.5 percent in 2001.

Market Moving Factors : Indian gold prices are highly correlated with international prices.

However, the fluctuations in the INR-US Dollar impact domestic

gold prices and have to be closely followed.

The global prices are driven by a host of factors with macro-economic factors like strength of the economy, rising importance

of emerging markets, currency movements, interest rates being

major influencing factors.

Supply-demand is a major influencer, amid rising global investordemand and almost stable supplies.

Shifts in official gold reserves, reports of sales/purchases bycentral banks act as major price influencing factors, whenever

such reports surface.

The investment in gold is influenced by comparative returnsfrom other markets like stock markets, real estate other

commodities like crude oil.

Domestically, demand and consequently prices to some extentare influenced by seasonal factors like marriages. The rural

demand is influenced by monsoon, agricultural output and

health of the rural economy.


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Introduction about Silver

General Characteristics : Silver's unique properties make it a very useful 'Industrial

Commodity', despite it being classed as a precious metal.

Demand for silver is built on three main pillars; industrial uses,photography and Jewellery & silverware accounting for 342, 205 and

259 million ounces respectively in 2002.

Just over half of mined silver comes from Mexico, Peru and UnitedStates, respectively, the first, second and fourth largest producing

countries. The third largest is Australia.

Primary mines produce about 27 percent of world silver, whilearound 73 percent comes as a by-product of gold, copper, lead, and

zinc mining.

The price of silver is not only a function of its primary output butmore a function of the price of other metals also, as world mine

production is more a function of the prices of other metals.

The tie between silver and economic activity is strong, given thataround two-thirds of total silver fabrication is in the industrial and

photographic sectors.


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Often a faster growth in demand against supply leads to drop instocks with government and investors.

Economically viable primary silver mine is a function of the worldsilver price level.

World Silver Supply from Above-ground Stocks MillionOunces :

2001 2002Implied Net Disinvestment -9.5 20.9Producer Hedging 18.9 -24.8Net Government Sales 87.2 71.3Sub-total Bullion 96.6 67.4Scrap 182.7 184.9Total 279.3 252.3

Indian Scenario : Silver imports into India for domestic consumption in 2002 was 3,400

tons down 25 % from record 4,540 tons in 2001.

Open General License (OGL) imports are the only significant source ofsupply to the Indian market.

Non-duty paid silver for the export sector rose sharply in 2002, up byclose to 200% year-on-year to 150 tons.

Around 50% of India's silver requirements last year were met throughimports of Chinese silver and other important sources of supply being

UK, CIS, Australia and Dubai.


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Indian industrial demand in 2002 is estimated at 1375 tons down by13 % from 1,579 tons in 2001. In spite of this fall, India is still one of

the largest users of silver in the world, ranking alongside Industrialgiants like Japan and the United States.

By contrast with United States and Japan, Indian industrial offtakefor fabrication in hardcore industrial applications like electronics and

brazing alloys accounts for only 15 % and the rest being for foils for

use in the decorative covering of food, plating of Jewellery and

silverware and jari.

In India silver price volatility is also an important determinant ofsilver demand as it is for gold.


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1.2 COMPANY PROFILE

Arcadia Stock & Share Broking Pvt. Ltd. :Arcadia came to life in 1995, right on the wave of a post-liberalization

market economy. As financial services became a major contributor to

economic growth, Arcadia has steadily shaped into a leading financial

service provider. In 1995, we were a small company with just 5 employees.

Today, we have a market presence across the country, with over 275

branches & franchisee outlets. We have established a strong retail networknot only in metros but also in tier two and tier three cities. Traditionally, our

operation was concentrated in fast-moving capital market of Western India.

But sensing great potential, we have launched strong expansion plans in

the North and the South. This systematic presence-building and efficient

delivery of service has put Arcadia among the fastest growing retail broking

houses in the country, with memberships in:

NATIONAL STOCK EXCHANGE OF INDIA (NSE) BOMBAY STOCK EXCHANGE (BSE) MULTI COMMODITY EXCHANGE (MCX) NATIONAL COMMODITY & DERIVATIVES EXCHANGE (NCDEX) DEPOSITORY PARTICIPANT OF CDSL ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

Today Arcadia has accumulated acknowledged leadership in execution and

clearing services on exchange-traded derivatives and cash-market products.

Working with the leading stock exchanges and noted financial institutions

has drilled in us the importance of real-time information and use of

analytical tools in investment decisions. Practicing this over the years has


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made us experts in understanding investor requirements. Arcadia's

integrated and innovative use of technology provides clients with the ability

to trade offline & online. Clients also have constant access to their accountinformation via internet.

Top Management :I. MR. ANTONY SEQUEIRA

( FOUNDER, MANAGING DIRECTOR)

The chief promoter of Arcadia has been associated with capital markets for

over26 years.Mr. Sequeira has a rich 19 years of banking experience with

Corporation Bank & Syndicate Bank. For six years he was the Chief

Executive of M/S Uday S. Kotak, now known as Kotak Securities. Mr.

Sequeira is respected in the organization for being a complete taskmaster.

His thrust for client satisfaction is an energizing force within the

organization. He is completely committed towards making Arcadia a one-

stop financial service provider.

II. MR. NITIN BRAHMBHATT( DIRECTOR )

The director is an arbitrage consultant by profession, with 25 years

experience in the capital market. Between 1985 and 1995, he played the

role of a leading market maker in the Bombay Stock Exchange. He has a

rich experience in the field of arbitrage. The credit for building the arbitrage

team for Arcadia goes to him. It is his innovative ideas that have made

Arcadia a leading arbitrage player in the country. Under his leadership,

Arcadia has created a mammoth network of branches & franchisees.


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III. MR. ARJUN MUDDA(EXECUTIVE DIRECTOR )

Mr. Arjun has 14 years of practical experience in hard core operations client

development, setting up retail business and customer service from the

broking market. He is basically a self starter a team builder who had

performed very well in the broking field by running the startup companies

on his own efforts and took it to a highly progressive level. He has always

shown to be the back bone of the company and continues to be the same.

He has been instrumental in setting up and developing retail business.

Since so many years, he has had hands on experience in building up goodnetwork and excellent relationship building in the market.

Head Office :328, NINAD, Bldg No.7, Service Road,

Near Bhavishya Nidhi Bhavan,

Bandra (East),

Mumbai-400051. CONTACT NUMBERS: +91 22 67739999

TOLL FREE: 1800 22 1555

FAX NUMBER: +91 22 26478988

EMAIL:[email protected]

WEBSITE:www.arcadiastock.com
mailto:[email protected]:[email protected]:[email protected]://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.commailto:[email protected]


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Vision And Mission : To be a reputed Provider of reliable, reddy-to-use, high-integrity

financial services

To offer customer delight with best value for money and maximummarket access

To persistently expand territorial presence and enlarge clientele base To be an involved business, with focus on technology, innovation and

creativity

To continually develop quality products, keeping pace with emergingmarket needs

To create a principled work atmosphere that empowers employees tolearn and grow

PRODUCT & SERVICESWe have a wide range of products specially designed to meet financial

requirements of individual and corporate inventors, both Indians and non-

Resident Indians.

CAPITAL MARKET

We offer trading in the National Stock Exchange (NSE) that has played a

catalytic role in reforming the Indian securities market in teams of

microstructure, market practices and trading volumes. Here we trade both

in the capital and the futures & options markets.

We also take you to trade in Bombay Stock Exchange Limited, the oldest

exchange in Asia, with a world-famous index, the sensex.


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COMMODITIES MARKET

We help you trade at the independent and de-mutulised Multi-Commodity

Exchange (MCX)

We facilitate trading in the National Commodity & Derivatives Exchange

Limited (NCDEX), a professionally managed on-line commodity exchange.

NRI

We have a separate desk to guide Non-Resident Indian investors about

Initial Public Offerings (IPO), the secondary market of listed stocks and

mutual funds.

INTERNET-BASED TRADING

The biggest advantage of online trading is that investors command an

expansive access to information. Corporate analysis and financial results

are available at the click of the mouse. In order to facilitate smooth and safe

trading on the Net, we employ the latest risk-management software. Also,

our trading terminals are linked with HDFC Bank and UTI Bank systems tofacilitate hassle-free transfer of funds.

MUTUAL FUNDS

Mutual funds are one of the best investments in the contemporary market

because they are cost-efficient and easy to manage. Its the mutual fund

manager who decides the direction of your investment. In fact, by pooling

money together in a mutual fund, small investors themselves can purchase

stocks and bonds playing much lower trading costs. This is where we came

in and offer active involvement in overall investment strategy. We bring

customized insights on how to handle your precious savings.


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IPO

Timely investment in Initial Public Offerings, better known as IPOs, offer

great opportunities for netting high returns in a short time span.

CATCH THE MARKET LIVE

Our Daily Market Report (DMR) contains updates and comprehensive

market information with guided insight into the investment environment

and market swings of the day. These are offered as pre-market directions

before trading, commences every day.

You can also get our live flashes on intraday trading, as well as investment

advice on our trading terminals online as well as offline. On request, we

make available the same information also on SMS.

BOOK-KEEPING IN BACKOFFICE

Not for from the trading terminals are our 24 X 7 back office software =.

Here the clients can access absolutely updated balances, stock holdings and

contract notes round the clock.

DEPOSITORY SERVICES

In the times of T+2, having a demate account linked to your trading

account becomes really convenient. You can open a demat account

with us so that we can track your profile better.


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Here are some reviews related with commodity market, commodity

market investment, its risk and return etc. which can help us for

conducting this project report. These are as follow:

1.Risk management of precious metals:( BY Shawkat Hammoudeh , LeBow College of Business , Drexel University ;

Farooq Malik , College of Business , University of Southern Mississippi ;

Michael McAleer , Econometric Institute , Erasmus School of Economics ,

Erasmus University Rotterdam ; and Tinbergen Institute , The Netherlands

and Department of Quantitative Economics Complutense University of

Madrid in march 2011)

Abstract :

This examined volatility and correlation dynamics in price returns of gold,

silver, platinum and palladium, and explores the corresponding risk

management implicationsfor market risk and hedging. Value-at-Risk (VaR)

is used to analyze the downside marketrisk associated with investments in

precious metals, and to design optimal risk management strategies. They

compute the VaR for major precious metals using the calibrated

RiskMetrics, different GARCH models, and the semi-parametric Filtered

Historical Simulation approach. The best approach for estimating VaR

based on conditional and unconditional statistical tests is documented. The

economic importance of the results is highlighted by assessing the daily

capital charges from the estimated VaRs.

Conclusion :

This paper examines the volatility dynamics in precious metals and explores

the corresponding risk management implications. The conditional volatility

and correlation dynamics in the price returns of gold, silver, platinum and


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palladium are modeled using daily data from January 1995 to November

2009. Value-at-Risk (VaR) is used to analyze the risk associated with

precious metals, and to design optimal risk management strategies. Wecompute the VaR for all precious metals using the calibrated RiskMetrics,

alternative empirical GARCH models, and the semi-parametric Filtered

Historical Simulation approach. Different risk management strategies are

suggested based on conditional and unconditional statistical tests. The

economic importance of our results is highlighted by calculating the daily

capital charges from the estimated VaRs using different methods for 19all

precious metals. This exercise shows that portfolio managers engaged in

precious metals who want to follow a conservative strategy should calculate

VaR using GARCH-t as this will yield fewer violations, though with lower

profitability. Our results are very timely and useful for financial market

participants as the global financial markets continue to experience

unprecedented volatility and the need for investment in precious metals

remains high.


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2.Expected commodity future returns :(BY Saqib Khan , Zeigham Khokher ,Timothy Simin in March

2008)

Abstract :

In this article, they posit an empirical beta pricing model of expected

commodity futures returns to explore predictable variation in their returns.

Their model allows commodity futures returns to vary with the holdings of

hedgers and allows these holdings to vary with business conditions. The

model also allows for time variation in expected returns with relative

scarcity of the commodity. Their evidence suggests that a large portion of

the predictable variation in futures returns is explainable by these asset

specific factors and that movements in these factors are related to

macroeconomic variables. This evidence is consistent with rational return

predictability.

Conclusion :

There is a large literature debating the predictability of returns. One path to

reconciling evidence of predictability and the efficient market hypothesis is

by way of intertemporal equilibrium pricing models. In these models

rational investors expect asset returns to vary with time varying risk premia

related to the state of the macro-economy. Also consistent with return

predictability are models of inefficient markets such as those by Shiller

(1984) and Summers (1986). Irrational bubbles might be indistinguishablefrom rational timevarying risk premia, as Fama (1991) notes in a sequel to

his seminal article on market efficiency. But, as he conjectures, exploring

the link between expected returns and the demand for capital goods may be


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fruitful in judging predictability. By incorporating holdings of hedgers that

vary with standard predictor variables, we present evidence on this issue.

The documented evidence suggests strong covariance between hedgers

holdings for capital goods like crude oil and macroeconomic state variables.

To a lesser extent we find similar results for supply conditions of capital

goods. Furthermore, variation in 15 expected commodity futures returns

can be explained, in part, by hedging responses to changing

macroeconomic conditions. This evidence is consistent with inter-temporal

asset pricing models with time varying risk premia that provide a rational

explanation for predictability in asset returns. While the evidence speaksdirectly to questions of market efficiency, precise judgments on the degree of

efficiency remain subject to priors.

Fama and French (1991) note that a problem that lurks on the horizon in

all tests of multifactor ICAPMs, is trying to explain why a state variable

that can explain common variation in returns might be of special hedging

concern to investors and so earn a special premium. We have in some

sense, circumvented this problem by directly incorporating proxies for

hedgers holdings and supply conditions that vary with business conditions

into a model of expected returns. Our preliminary evidence on net hedging

pressure coupled with the cross-market effects of hedging pressure found in

DeRoon et al. (2000) may lead to a better understanding of how hedging

demands interact with the business conditions to move expectations of

returns across assets. Most general equilibrium model of commodity

markets assume risk neutrality, our results on how commodity marketscarcity relates to risk premia may be similarly beneficial.


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3.Do Precious Metals Markets Influence Stock Markets?(A Volatility Approach by Luca Morales)

Abstract :

This paper investigates the nature of volatility spillovers between stock

returns and precious metals returns for the G-7 countries over the 1995-

2006 period. They divide our sample into a number of sub periods, prior to,

during and after the Asian crisis, with the objective to provide a wide

analysis of the behaviour of these two markets taking into account the

effects of the Asian crisis; they use EGARCH modelling which takes into

account whether bad news has the same impact on volatility as good news.

The results show that there is no evidence of volatility persistence from

stock returns to precious metals returns, but overall the results are

significant in the other way around. In terms of volatility spillovers effects,

the main findings are that there is evidence of volatility spillovers running in

a bidirectional way in almost all the cases. And finally, the results from

asymmetric spillover effects show that negative news have a stronger impactin these financial markets than positive news.

Conclusion :

The existing literature shows that little attention has been paid to the study

of interlinkages between stock markets and precious metals markets and in

particular to the analysis of volatility spillovers between them. The

relationships between stock returns and precious metals returns demandmore research, as these two markets are very important in terms of portfolio

and risk management decisions. Hillier, Draper and Faff (2006) notice that

gold, platinum and silver have the potential to play a diversifying role in

investment portfolios, as precious metals exhibit some hedging capability


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during periods of abnormal markets volatility. Wolfle (2006) analysed

relationships between commodities and two stock markets and he

concluded that information transmission between stock and commoditymarkets is rejected; consequently his findings support the use of

commodities to diversify risk in stock portfolios. Therefore, our analysis is

motivated but the results of previous studies, where precious metals

markets appeared to be an interesting option for investors to diversify their

portfolios and to implement their hedging techniques.

The main findings could be summarised as follows: in terms of volatility

persistence, our analysis shows that overall there are no significantcoefficients from stock returns to precious metals returns, while there is an

opposite result in the opposite case, where almost all the coefficients appear

to be significant. The analysis of the coefficients for the volatility spillovers

shows that the results are quite consistent across countries, and markets

over time in most of the cases, meaning that information from stock

markets affects precious metals markets and vice versa. The results from

the asymmetric spillovers analysis show that overall good news have less ofan impact in the markets than bad news.

Our results are consistent with Wolfle (2006) with regard to insignificant

evidence effects that were found running from the stock markets to the

commodities markets, but our results differ in the opposite direction, where

we found significant coefficients in some of the cases.

After getting the results from our EGARCH methodology and taking into

account that even the results are showing that stock returns and precious

markets returns are influenced by the information, reactions, shocks,

events that take place in any of them, a question that will be necessary to

address in a future research is which markets are being affected to a greater


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extent. If we found that stock returns are affected more negatively than

precious metals it will mean that investors will be able to use precious

metals to diversify their portfolio. As even the economy becomes in crisis ofshock, probably metal markets will suffer a lower effect than stock markets.

This is because they are characterized as a store of value and they will tend

to keep their value for a longer period than in the case of the stock markets;

then the use of precious metals markets could be important in order to

prevent bigger loses.

Investors can use precious metals markets to diversify their portfolio in

situations were the national currency is depreciating or where the stockmarkets returns decrease. Also it will be interesting to analyse if in some

occasions it could be possible that the precious metals returns could be

higher than the stock markets returns. Tully and Lucey (2006) found that

dollar depreciation and a growing risk of dollar devaluation are likely to

strengthen investors demand for gold. Financial analysts have attributed to

the rise in golds price, the depreciation of the dollar value on international

markets. Traditionally gold has played a significant role during times ofpolitical and economic crises and during equity market crashes. This is still

the case in a post Bretton-Woods era.

Our results provide evidence of the need for further research in this area.

Possible extensions could focus to implement this analysis in the case of the

European markets, using multivariate techniques where key indicators such

as economic growth, the interest rates and exchange rates should be

included in the analysis in order to get information of the reaction of themarkets when changes in interest rates or currency

depreciation/appreciation occur.


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4.Term structure model of commodity prices :(By Delphine Lautier)

Abstract:

This review article describes the main contributions in the literature on term

structure models of commodity prices. A first section is devoted to the

theoretical analysis of the term structure. It confines itself primarily to the

traditional theories of commodity prices and to their explanation of the

relationship between spot and futures prices. The normal backwardation

and storage theories are however a bit limited when the whole term

structure is taken into account. As a result, there is a need for an extension

of the analysis for long-term horizon, which constitutes the second point of

the section. Finally, a dynamic analysis of the term structure is presented.

Section two is centered on term structure models of commodity prices. The

presentation shows that these models differ on the nature and the number

of factors used to describe uncertainty. Four different factors are generally

used: the spot price, the convenience yield, the interest rate, and the long-term price. Section three reviews the main empirical results obtained with

term structure models. First of all, simulations highlight the influence of the

assumptions concerning the stochastic process retained for the state

variables and the number of state variables. Then, the method usually

employed for the estimation of the parameters is explained. Lastly, the

models performances, namely their ability to reproduce the term structure

of commodity prices, are presented. Section four exposes the two main

applications of term structure models: hedging and valuation. Section five

resumes the broad trends in the literature on commodity pricing during the

1990s and early 2000s, and proposes futures directions for research.


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Conclusion:

In this study, they can identify some of the broad trends in the literature on

commodity pricing during the 1990s and early 2000s.

Firstly, considering the main developments on term structure models of

commodity prices, it is possible to determine some specificity of

commodities that distinguish them from other assets. Commodities are

indeed characterized by mean reversion in spot and futures prices.

Moreover, because arbitrage relationships between the futures market and

the physical market are limited, price volatility is positively correlated with

the degree of backwardation. Prices are also sometimes affected by

seasonality.

Lastly, the term structure is characterized by the Samuelson effect.

Secondly, independently of the number of state variables included, the term

structure models of commodity prices are generally conceived in a partial

equilibrium framework consequently, the .selection of the state variables

can be considered as somehow arbitrary. However, the choice is most of the

time based on the traditional theories. Moreover, autonomous spot price,

convenience yield and long-term price may be regarded as the reduced form

of a more general model in which these variables are endogenously

determined by production, consumption and storage decisions. Still, until

now, nobody has really proved that the convenience yield is a better choice

than the long-term price as a second factor. The comparison between the

models is quite difficult to undertake.

Future developments in term structure model of commodity prices will

probably introduce a more precise description of the prices behaviour. Until

now, the leptokurtic nature of commodity returns (Dusak, 1973), and the

fact that commodity returns distribution are negatively skewed were for


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example ignored. The introduction of such characteristics in term structure

models could lead to animprovement of the performances. However, in that

case, the question of the arbitrage between reality and simplicity arises.Although such an introduction may improve the performances of the

models, there will be a balance to find between the fidelity of the prices

models and the need for parsimony, especially when the models are

conceived for the evaluation of more complex derivatives products, as real

options.

As far as the applications of term structure models are concerned, almost

two directions can be drawn. For hedging purposes, to be adapted bypractitioners, the literature could progress towards practical

considerations, like the transactions costs associated with hedging

portfolios or the rebalancing of these portfolios. Moreover, there is a need to

quantify the risk associated with these portfolios, using for example value

at risk methods (Cabedo and Moya (2003)). For the valuation ofreal assets

relying on the theory of real options, it could be interesting to introduce

other sources of uncertainty in the valuation process. Until now, theanalysis framework taken into consideration is most of the time simplistic,

and the main source of uncertainty is the price of the commodity.

However, the introduction of new sources of uncertainty prevents probably

from pricing several options simultaneously. Once again, some arbitrages

must be done.


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5.Is the Gold-to-Silver Price Ratio a Valid Indicator forInvestment Strategies based on Sector, Style, or Size?

(Preliminary paper)

Abstract:

Historically, gold and silver have been regarded as the most precious of all

metals. However, their main uses in modern times are quite distinct: gold is

mainly an investment vehicle, while silver is a key industrial commodity.

Using the data from January 1972 to December 2008, we address whether

the gold-to-silver price ratio is a viable indicator that can be used as thebasis of size and style investing strategies. In addition, they examine the

possibility of employing this ratio as the basis of a profitablerotation trading

strategy among the ten sectors in S&P 500 indexes.

Conclusion:

In this preliminary paper they examine the relationship of average daily rate

of return for gold, silver, and S&P 500 index from January 1972 toDecember 2008. They analyze and compare these relationships in the

overall period and in periods defined by the NBER as contractionary or

expansionary. They find evidence of the significant inverse relationship

between returns on small firms and the gold-to-silver price ratio. This

relationship also holds for small size growth size firms. These preliminary

results indicate that gold-to-silver price ratio may serve as an indicator for

the rotation strategies in time investing and sector investing. The complete

version of the paper will have a fully developed literature review. They were

investigate the risk-adjusted returns of the portfolios in the two sub-periods

within the framework of Fama and French (1993) and Carhart (1997).

Furthermore, they were adopt the change of gold-to-silver ratio/75-day


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average gold-to-silver ratio as a signal of the status of the economy and

forecast the forward looking returns for the large capitalization portfolio,

small-capitalization portfolio, and the ten sectors in the S&P 500 index. Amodified ratio (that is the forward price of gold/forward price of silver) is

also used. They expect that the paper, when completed, were provide insight

into the suitability of employing the gold-to-silver price ratio as a leading

indicator for the bullish and bearish markets. Further, the completed paper

will show whether it is possible to create a profitable trading strategy based

on the gold-to-silver price ratio.


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3.1 Problem definition: The problem related to know about future investment opportunity and

the risk & return on their investment in precious metal like gold and

silver of commodity market.

3.2 Research Objective:Primary objectives:

To know the investment opportunity in commodity market. To know the relationship between precious metal in commodity

market and U.S. dollar.

To know risk and return from the investment in precious metal ofcommodity market.

To know the performance of precious metal in Indian commoditymarket.

Secondary objective:

To get knowledge about commodity market. To understand about commodity derivatives. To know the fluctuation in gold price , silver price and also U.S.

dollar.

3.3 Research Design : Research design is the conceptual structure within which research is

conducted; it constitutes the blueprint for collection, measurementand analysis of data.


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For this study we have choose DESCRIPTIVE research design.

3.4 Data collection method :Primary data:

Consists of information gathered for some specific purposes and

primary data is also that u collects through researches, surveys and

experiments.

Secondary data:

Secondary data is consists of information that already exists

somewhere having being collected for some purposes and is been

utilize for references.

Here in this report, we have taken secondary data method and

collected data from following sources.

Internet Books Companys record Companys journals
http://www.blurtit.com/q347507.htmlhttp://www.blurtit.com/q347507.html


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3.5 Limitations of Research :Even though we gave our best to complete this project, certain

limitations are still remaining which are as follows.

The report conduct only precious metal commodity so this report nothelps out to that investor who wants to invest in other commodity.

Tools which we used for calculating risk and return are not enough.

It contains only gold and silver commodity.

For the very few contract of platinum, we cant consider platinum.

Time duration is also one of the limitations of this project.


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TABLE: 1 RISK & RETURN ON CLOSING CONTRACT PRICE

OF GOLD

Month Value ( rs. Inlakhs )s. In

Goldreturn

(x-x) (x-x)2

Mar(2008) 13303709.69

Apr 9783636.87 -26.4593 -29.817273 889.0697752

May 10057079.86 2.794901 -0.5630391 0.317012978

Jun 12407210.28 23.36792 20.0099801 400.3993045

Jul 18939267.3 52.64727 49.2893259 2429.437643

Aug 15149048.75 -20.0125 -23.370428 546.1769083

Sep 19956929.49 31.73718 28.3792388 805.3811964

Oct 15051936.16 -24.5779 -27.935836 780.410938

Nov 12313028.42 -18.1964 -21.554322 464.5887926

Dec 14873513.2 20.79492 17.4369827 304.0483655

Jan(2009) 18612360.13 25.13762 21.7796777 474.3543597

Feb 20429157.13 9.761239 6.40329892 41.00223711

Mar 24137358.49 18.15151 14.7935739 218.8498287

Apr 13914323.29 -42.3536 -45.711519 2089.542999

May 13139779.36 -5.56652 -8.9244628 79.64603566

Jun 12430826.49 -5.39547 -8.7534104 76.62219433

Jul 10072292.46 -18.9733 -22.331208 498.6828667

Aug 8105614.81 -19.5256 -22.883561 523.6573776

Sep 12607367.37 55.53869 52.1807531 2722.830996

Oct 12519294.37 -0.69858 -4.0565239 16.45538621

Nov 17474643.5 39.5817 36.2237564 1312.160529

Dec 21554174 23.34543 19.9874887 399.499706

Jan(2010) 15823072.03 -26.5893 -29.947231 896.8366418

Feb 17272860.54 9.162497 5.80455675 33.69287905

Mar 17082508.35 -1.10203 -4.4599708 19.89133959

Apr 14540787.51 -14.8791 -18.237025 332.5890715

May 21556973.93 48.25176 44.8938233 2015.455372

Jun 23183162.45 7.543677 4.18573685 17.520393 Jul 21812082.37 -5.91412 -9.2720605 85.97110509

Aug 16812739.39 -22.9201 -26.278003 690.5334483

Sep 18094300.42 7.622559 4.26461899 18.1869751

Oct 19349094.58 6.934748 3.57680782 12.79355415

Nov 19609159.08 1.344065 -2.0138748 4.055691865


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S.D= -2

/ n

CHART: 1

Interpretation:

The above table shows the contract closing price of the gold in commodity

market and it also shows the risk and return on the contract by calculatingthe standard deviation. And chart shows the fluctuation on return of gold

contract price.

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jul

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nov

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sep

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mar r

Gold Return

Series1

Dec 14738043.13 -24.841 -28.198965 795.1815989

Jan(2011) 17572472.02 19.23206 15.8741169 251.987588

Feb 14083970.99 -19.8521 -23.210019 538.7049972

Mar 16308243.58 15.79294 12.4349961 154.6291292

S.D 24.11843707


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TABLE : 2 RISK & RETURN ON CLOSING CONTRACT PRICE

OF SILVER

Month Value ( rs. Inlakhs )s. In

Silverreturn

(x-x) (x-x)2

Mar(2008) 8063825.93

Apr 5516365.43 -31.5912 -38.5154 1483.433

May 4746409.57 -13.9577 -20.8818 436.0502

Jun 5498932.58 15.85457 8.930424 79.75247

Jul 7067360.33 28.5224 21.59825 466.4846

Aug 6177651.73 -12.589 -19.5131 380.7622

Sep 7331677.48 18.68065 11.7565 138.2154Oct 5536421.96 -24.4863 -31.4104 986.6155

Nov 3969335.59 -28.305 -35.2292 1241.096

Dec 4058994.55 2.25879 -4.66536 21.76558

Jan(2009) 5328398.71 31.27386 24.34971 592.9083

Feb 6320724.53 18.62334 11.69919 136.8711

Mar 6155244.33 -2.61806 -9.54221 91.05372

Apr 4365411.02 -29.0782 -36.0023 1296.168

May 5309828.42 21.6341 14.70995 216.3826

Jun 7715046.89 45.29748 38.37333 1472.512

Jul 4656576.05 -39.6429 -46.5671 2168.493

Aug 6001857.33 28.88992 21.96577 482.4952

Sep 8738445.07 45.59568 38.67153 1495.487

Oct 8440848.94 -3.4056 -10.3297 106.7036

Nov 10257322.7 21.52004 14.59589 213.0399

Dec 9601391.68 -6.39476 -13.3189 177.3933

Jan(2010) 8587938.45 -10.5553 -17.4794 305.5303

Feb 9826739.27 14.42489 7.500742 56.26113

Mar 8958236.42 -8.83816 -15.7623 248.4504

Apr 8083338.83 -9.7664 -16.6906 278.5746

May 10071362.56 24.59409 17.66994 312.2268

Jun 11130992.7 10.52122 3.59707 12.93891

Jul 10357543.78 -6.94861 -13.8728 192.4534

Aug 11564640.12 11.65427 4.730122 22.37406

Sep 12494975.15 8.044652 1.120502 1.255525

Oct 19538467.67 56.3706 49.44645 2444.951

Nov 26761011.14 36.96576 30.04161 902.4985


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CHART: 2

Interpretation:

The above table shows the contract closing price of the silver in commodity

market and it also shows the risk and return on the contract by calculating

the standard deviation. And chart shows the fluctuation on return of silver

contract price.

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Silvar Return

Series1

Dec 22289596.26 -16.7087 -23.6328 558.5112

Jan(2011) 25132683.5 12.75522 5.831071 34.00139

Feb 26894510.54 7.010103 0.085953 0.007388

Mar 35948167.34 33.66359 26.73944 714.9975

S.D 23.43354449


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TABLE: 3 MONTHLY DOLLAR RETURN

Month $ Price $ ReturnMar(2008) 40.14

Apr 39.97 -0.423518

May 41.88 4.7785839

Jun 42.76 2.1012416

Jul 42.72 -0.093545

Aug 42.92 0.4681648

Sep 45.42 5.8247903

Oct 48.62 7.0453545Nov 48.79 0.3496503

Dec 48.48 -0.635376

Jan(2009) 48.73 0.5156766

Feb 49.19 0.943977

Mar 51.21 4.1065257

Apr 50.06 -2.245655

May 48.55 -3.01638

Jun 47.75 -1.647786

Jul 48.44 1.4450262

Aug 48.33 -0.227085Sep 48.36 0.0620732

Oct 46.72 -3.391232

Nov 46.56 -0.342466

Dec 46.16 -0.859107

Jan(2010) 45.92 -0.519931

Feb 46.35 0.9364111

Mar 45.5 -1.833873

Apr 44.47 -2.263736

May 45.87 3.1481898

Jun 46.58 1.5478526

Jul 46.84 0.5581795

Aug 46.58 -0.555081

Sep 45.99 -1.266638

Oct 44.43 -3.392042

Nov 45 1.2829169


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Ri = Current Month Closing Price- Previous Month Closing Price *100

Previous Months Closing Price

CHART: 3

Interpretation:

The above table shows the dollar price and its average return during 2008 to

2011. And above chart shows the fluctuation in average dollar return.

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2

4

6

8

mar

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Series1

$ Returm

Dec 45.12 0.2666667

Jan(2011) 45.4 0.6205674

Feb 45.42 0.0440529

Mar 44.97 -0.990753


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TABLE:4 RELATIONSHIP BETWEEN GOLD & DOLLAR

MONTH $ r$

Return

Gold

Return

x2 Y2 XY

Mar(2008)

Apr -0.423518 -26.4593 0.179367 700.0946 11.20598

May 4.7785839 2.794901 22.83486 7.811472 13.35567

Jun 2.1012416 23.36792 4.415216 546.0597 49.10165

Jul -0.093545 52.64727 0.008751 2771.735 -4.92491

Aug 0.4681648 -20.0125 0.219178 400.5002 -9.36915

Sep 5.8247903 31.73718 33.92818 1007.249 184.8624

Oct 7.0453545 -24.5779 49.63702 604.0732 -173.16

Nov 0.3496503 -18.1964 0.122255 331.109 -6.36238

Dec -0.635376 20.79492 0.403703 432.4287 -13.2126

Jan(2009) 0.5156766 25.13762 0.265922 631.8999 12.96288

Feb 0.943977 9.761239 0.891093 95.28179 9.214385

Mar 4.1065257 18.15151 16.86355 329.4773 74.53964

Apr -2.245655 -42.3536 5.042967 1793.827 95.11158

May -3.01638 -5.56652 9.09855 30.98614 16.79074

Jun -1.647786 -5.39547 2.715198 29.1111 8.890579

Jul 1.4450262 -18.9733 2.088101 359.9861 -27.4169

Aug -0.227085 -19.5256 0.051568 381.2491 4.433972

Sep 0.0620732 55.53869 0.003853 3084.546 3.447467Oct -3.391232 -0.69858 11.50046 0.488014 2.369047

Nov -0.342466 39.5817 0.117283 1566.711 -13.5554

Dec -0.859107 23.34543 0.738064 545.0091 -20.0562

Jan(2010) -0.519931 -26.5893 0.270328 706.9909 13.82459

Feb 0.9364111 9.162497 0.876866 83.95135 8.579864

Mar -1.833873 -1.10203 3.363089 1.21447 2.020983

Apr -2.263736 -14.8791 5.124502 221.3876 33.68236

May 3.1481898 48.25176 9.911099 2328.232 151.9057

Jun 1.5478526 7.543677 2.395848 56.90706 11.6765

Jul 0.5581795 -5.91412 0.311564 34.97682 -3.30114Aug -0.555081 -22.9201 0.308115 525.331 12.72251

Sep -1.266638 7.622559 1.604372 58.10341 -9.65502

Oct -3.392042 6.934748 11.50595 48.09073 -23.523

Nov 1.2829169 1.344065 1.645876 1.806511 1.724324

Dec 0.2666667 -24.841 0.071111 617.0753 -6.62427


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Jan(2011) 0.6205674 19.23206 0.385104 369.8721 11.93479

Feb 0.0440529 -19.8521 0.001941 394.1059 -0.87454

Mar -0.990753 15.79294 0.981591 249.417 -15.6469

r -0.180438

r2 0.032558

CHART: 4

Interpretation:

The above table and chart shows the return on silver contract closing price

as well as dollar and also shows co-relation between them. From the above

table we can say that there are negative relation between gold and dollar.

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Gold v/s $

Series1

Series2


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TABLE: 5 RELATIONSHIPS BETWEEN SILVAR &

DOLLAR

MONTH $ r$Return

SilverReturn

x2 Y2 XY

Mar(2008)

Apr -0.423518 -31.5912 0.179367 998.0039 13.37943

May 4.7785839 -13.9577 22.83486 194.8174 -66.698

Jun 2.1012416 15.85457 4.415216 251.3674 33.31428

Jul -0.093545 28.5224 0.008751 813.5273 -2.66814

Aug 0.4681648 -12.589 0.219178 158.4829 -5.89373

Sep 5.8247903 18.68065 33.92818 348.9667 108.8109

Oct 7.0453545 -24.4863 49.63702 599.5789 -172.515Nov 0.3496503 -28.305 0.122255 801.173 -9.89685

Dec -0.635376 2.25879 0.403703 5.102132 -1.43518

Jan(2009) 0.5156766 31.27386 0.265922 978.0543 16.1272

Feb 0.943977 18.62334 0.891093 346.8288 17.58

Mar 4.1065257 -2.61806 16.86355 6.854238 -10.7511

Apr -2.245655 -29.0782 5.042967 845.5417 65.29961

May -3.01638 21.6341 9.09855 468.0343 -65.2567

Jun -1.647786 45.29748 2.715198 2051.862 -74.6405

Jul 1.4450262 -39.6429 2.088101 1571.56 -57.285

Aug -0.227085 28.88992 0.051568 834.6275 -6.56047Sep 0.0620732 45.59568 0.003853 2078.966 2.830272

Oct -3.391232 -3.4056 11.50046 11.59811 11.54918

Nov -0.342466 21.52004 0.117283 463.1121 -7.36988

Dec -0.859107 -6.39476 0.738064 40.89296 5.49378

Jan(2010) -0.519931 -10.5553 0.270328 111.4144 5.488024

Feb 0.9364111 14.42489 0.876866 208.0775 13.50763

Mar -1.833873 -8.83816 3.363089 78.11307 16.20806

Apr -2.263736 -9.7664 5.124502 95.38257 22.10855

May 3.1481898 24.59409 9.911099 604.8693 77.42686

Jun 1.5478526 10.52122 2.395848 110.6961 16.2853

Jul 0.5581795 -6.94861 0.311564 48.28318 -3.87857

Aug -0.555081 11.65427 0.308115 135.822 -6.46907

Sep -1.266638 8.044652 1.604372 64.71643 -10.1897

Oct -3.392042 56.3706 11.50595 3177.645 -191.211

Nov 1.2829169 36.96576 1.645876 1366.467 47.424


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Dec 0.2666667 -16.7087 0.071111 279.1807 -4.45565

Jan(2011) 0.6205674 12.75522 0.385104 162.6956 7.915473

Feb 0.0440529 7.010103 0.001941 49.14154 0.308815

Mar -0.990753 33.66359 0.981591 1133.237 -33.3523

r -0.1703

r2 0.029002

CHART: 5

Interpretation:

The above table and chart shows the return on silver contract closing price

as well as dollar and also shows co-relation between them. From the above

table we can say that there are negative relation between silver and dollar.

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Silvar v/s $

Series1

Series2


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5.1 FINDINGS:

Major factors which affect the market price of gold & silveris world macro-economic factors- US Dollar, Interest Rate,

Domestic & International demand based on output &

market price.

Worlds biggest gold manufacturing country is South Africawith 297 tones followed by United Nations and Australia.

India is largest consumer of gold with annual demand of800 tones followed by United States.

The contract Price of the gold increased by 14.71 % duringthe period of Apr-2008 to Mar-2009.

The contract Price of the gold increased by 22.77 % duringthe period of Apr-2009 to Mar-2010.

The contract Price of the gold increased by 12.16 % duringthe period of Apr-2010 to Mar-2011

The contract Price of the silver decreased by 11.58 % duringthe period of Apr-2008 to Mar-2009.

The contract Price of the silver increased by 10.52 % duringthe period of Apr-2009 to Mar-2010.

The contract Price of the silver increased by 34.47 % duringthe period of Apr-2010 to Mar-2011.

Price of dollar decreased by 1.12% in last year. Gold and US $ has negative relationship where r = -0.18.


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Silver and US $ has negative relationship where r = -0.17. The standard deviation of gold contract is 23.43. The standard deviation of silver contract is 24.12.


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5.2 CONCLUSIONS:Members who have invested in share market should be explained

about the commodity market. There should be some experts

employed specially for analyzing performance of commodity such

as precious metals to provide fruitful results to investors. In

commodity there is only future and no other like option, swaps,

credit derivative are available. The investors should be given

protection for their investment in terms of increased margin. In

commodity market there should be lower quantity available for

precious metals so that investors can invest in precious metal

commodities. The investor should invest in gold and silver rather

than platinum because the risk is more in platinum as compare

to gold and silver.


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RECOMMENDATIONS

Gold :

Those investors who want to invest in Gold are advisable to do their

investment in it because the contract price of gold is increased

continuously during April-2008 to March-2011. There is negative

relationship between Gold and U.S. Dollar. As we know that Gold price is

going high day by day, so investor of gold can get maximum return at

minimum risk as gold price increased day by day and the possibilities of

decreasing the gold price is very low. So we can suggest that to invest in

gold is beneficial for the investors.

Silver :

Those investors who want to invest in Silver are advisable to do their

investment in it after knowing the market condition because during

April-2008 to March-2011 in first year silver contract price was

decreased but after that it is increased. So knowing the market condition

is very much important aspect for the investor. There is also negativerelationship between Silver and U.S. Dollar. But silver is also one of the

good precious metal which can get higher return at lower risk. So

investing in silver is also beneficial for the investors.

Platinum:

Platinum is very costliest metal and because of this there are very few

contracts are held in every year. So we can not consider it in our report

because it cannot give a right answer for investment. So we can suggest

to investor that rather than investing in platinum they can invest in gold

and silver.


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BIBLIOGRAPHY AND REFRENCES:

BOOKS : Commodities and Commodity Derivatives: Modeling and pricing for

Agricultural, Metals and Energy. (By Helyette Geman)

Precious metals investing for Dummies. (By Paul J. Mladjenovic)

WEBSITES : www.arcadia.com www.mcxindia.com www.kitco.com www.forex.com www.gfms.co.ukRESEARCH PAPERS : www.stocktradingmarket.net
http://www.arcadia.com/http://www.mcxindia.com/http://www.kitco.com/http://www.forex.com/http://www.gfms.co.uk/http://www.gfms.co.uk/http://www.gfms.co.uk/http://www.forex.com/http://www.kitco.com/http://www.mcxindia.com/http://www.arcadia.com/

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