B. N. VAIDYA & ASSOCIATES B. N. VAIDYA & ASSOCIATES Gold and Silver Gold and Silver Indian Scenario Indian Scenario Bhargava Bhargava Vaidya Vaidya 24/08/2007 24/08/2007
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Gold and Silver Gold and Silver Indian ScenarioIndian Scenario
BhargavaBhargava VaidyaVaidya24/08/200724/08/2007
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
India Market StatusIndia Market Status
Physical MarketPhysical Market•• Only OTC Only OTC
Futures Futures
•• Active On Local Exchanges Active On Local Exchanges
MCX Lion shareMCX Lion share
•• Forward Forward -- very small (OTC)very small (OTC)
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Driving Factors Driving Factors -- (India)(India)-- II
•• International PriceInternational Price
•• Government SupplyGovernment Supply
•• Festive demand ??Festive demand ??
•• Scrap Supply ????Scrap Supply ????
•• Interest Arbitrage / LC ImportsInterest Arbitrage / LC Imports
•• Taxes Levies and ConditionsTaxes Levies and Conditions
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Driving Factors Driving Factors -- (India) (India) -- IIII
•• Festival BuyingFestival Buying•• Marriage BuyingMarriage Buying•• Collection for FutureCollection for Future•• Investment Buying Investment Buying
-- Harvest Harvest -- Gold / Silver swap ???Gold / Silver swap ???
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Driving Factors Driving Factors -- (India) (India) -- IIIIII
Indian Bullion MarketIndian Bullion Market
•• Volatility SensitiveVolatility Sensitive•• Gold Price SensitivityGold Price Sensitivity•• Silver Price SensitivitySilver Price Sensitivity
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Factors Affecting Gold Factors Affecting Gold -- II
TRADITIONALTRADITIONAL•• USD USD –– Currency inverse relationCurrency inverse relation
•• GEO POLITICAL SITUATIONGEO POLITICAL SITUATION-- Safe Haven StatusSafe Haven Status
•• MINERS HEDGING POSITIONMINERS HEDGING POSITION
•• CENTRAL CENTRAL BANK'sBANK's ACTIVITIESACTIVITIES
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Factors Affecting Gold Factors Affecting Gold -- IIII
NEWNEWMedia RoleMedia Role
•• HEDGE FUND ACTIVITIESHEDGE FUND ACTIVITIES
•• ETFsETFs
•• NEW INVESTOR CLASS NEW INVESTOR CLASS
-- in mines , in metals in mines , in metals
•• DERIVATIVES RELATIONSDERIVATIVES RELATIONS
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Gold ImportsGold Imports
•• Restricted ThroughRestricted ThroughNominated BanksNominated BanksNominated Government AgenciesNominated Government AgenciesSelect Category of ExportersSelect Category of Exporters
•• ADVANTAGEOUSADVANTAGEOUSNumbered barsNumbered barsWeight in metricWeight in metric
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Private Sector SupplyPrivate Sector Supply
•• Location FriendlyLocation Friendly
•• To Improve ServiceTo Improve Service
•• Two way Trade possibleTwo way Trade possible
•• To Integrate Bullion players with To Integrate Bullion players with International MarketInternational Market
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Gold ExportsGold Exports--IndiaIndia
•• Can Bullion Be Exported ????Can Bullion Be Exported ????•• Imported Bars Re Imported Bars Re -- ExportedExported•• Value Addition NormsValue Addition Norms-- JewelleryJewellery Plain Gold : Plain Gold :
Hand made, Machine madeHand made, Machine made-- JewelleryJewellery Gold StuddedGold Studded-- Articles and MedallionsArticles and Medallions
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Gold Loan (India)Gold Loan (India)
•• Domestic Domestic Restricted to 180 daysRestricted to 180 days
•• For Exports For Exports Maximum 270 daysMaximum 270 days
Direct supplier list restrictedDirect supplier list restricted
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Supply Gold Supply Gold -- (India)(India)
•• FRESH IMPORTS 68 %FRESH IMPORTS 68 %-- SalesSales-- LoansLoans•• SCRAP RECYCLING 30 %SCRAP RECYCLING 30 %•• OTHERS 2 %OTHERS 2 %
-- Government Supply Government Supply -- Domestic Loans / OthersDomestic Loans / Others-- Forwards ??Forwards ??
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand Demand -- GoldGold
Factors driving DemandFactors driving Demand
•• Marriage / Festival SeasonMarriage / Festival Season•• Gifts Gifts -- CorporateCorporate•• Investment outlookInvestment outlook•• Status of economy (Rural)Status of economy (Rural)•• New Products New Products –– ETF’sETF’s
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand Gold Demand Gold –– (India)(India)
•• JewelleryJewellery 60%60%
•• Investment Investment (Incl. Crude Jewellery) (Incl. Crude Jewellery) 32%32%-- GAP / Collection /CoinsGAP / Collection /Coins-- Returns related InvestmentReturns related Investment
•• Industrial/Coins Gifts } 8% Industrial/Coins Gifts } 8% •• ETF & Exchange Related }ETF & Exchange Related }
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand Demand -- GoldGold
Factors deterrent to DemandFactors deterrent to Demand
•• Price VolatilityPrice Volatility•• White GoodsWhite Goods•• PricePrice•• Economic Conditions (Rural)Economic Conditions (Rural)•• Paper substitutesPaper substitutes
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand for Exports Demand for Exports -- GoldGold
•• JewelleryJewellery
•• IndustrialIndustrial
•• Other Trading / InvestmentOther Trading / Investment
BASE STOCK REQUIREMENTBASE STOCK REQUIREMENT
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Factors Affecting Silver Factors Affecting Silver -- II
TRADITIONALTRADITIONAL•• Gold Gold -- RelationRelation
•• Base Metal Base Metal -- Relation Relation
•• By By -- Products PositionProducts Position
•• Industrial DemandIndustrial Demand
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Factors Affecting Silver Factors Affecting Silver -- IIII
NEWNEWMedia RoleMedia Role
•• Hedge Fund ActivitiesHedge Fund Activities
•• E T F E T F
•• Derivatives RelationsDerivatives Relations
•• Chinese FactorChinese Factor
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Supply SilverSupply Silver
•• Imports 55% Imports 55% ––75 %75 %
•• Scrap / Disinvestment 20% Scrap / Disinvestment 20% -- 40% 40%
•• Government Supply 1% Government Supply 1% --30%30%
In past India In past India -- Net Exporter of silverNet Exporter of silver
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand Demand -- SilverSilver
•• SilverwareSilverware•• JewelleryJewellery•• Coins Coins –– Investment BarsInvestment Bars
•• IndustrialIndustrial
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Demand Demand -- SilverSilver
Factors driving DemandFactors driving Demand-- Industrial almost steadyIndustrial almost steady
•• PricePrice•• Economic Condition (Rural)Economic Condition (Rural)•• FestivalsFestivals•• Positive Price forecastPositive Price forecast
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Investment AvenuesInvestment Avenues
•• Physical (India Physical (India –– Y)Y)•• Depositary / D Depositary / D ––mat (India mat (India -- ? )? )•• Unallocated (India Unallocated (India -- N)N)•• ETF (India ETF (India –– Y)Y)•• Futures / Forwards (India Futures / Forwards (India -- Y)Y)•• Options (India Options (India -- N)N)•• G.A.P. (India G.A.P. (India -- ? )? )
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
Industry Target Industry Target -- IndiaIndia
•• Make India No. 1 Bullion Dealing CenterMake India No. 1 Bullion Dealing Center
•• Price DiscoverersPrice Discoverers
•• ChaneliseChanelise Huge Reserve Stock of Gold Huge Reserve Stock of Gold
•• Clearing House of the WorldClearing House of the World
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES
TARGET 2010TARGET 2010
INDIA INDIA A A
MAJOR MAJOR BULLION & JEWELLERY BULLION & JEWELLERY
HUBHUB
B. N. VAIDYA & ASSOCIATESB. N. VAIDYA & ASSOCIATES