Presentation on Increase in gold prices has given a fresh opportunity to the investors to invest their money in the new emerging asset.

Economics Assignment

Increase in gold prices has given a fresh opportunity to the investors to

invest their money in the new emerging asset.By Anushree Mazumdar

Gold in various forms in which you can invest

If you are a staunch believer in owning gold in its physical form, invest in gold coins or gold bars. If you are saving for an upcoming marriage in the family, do not buy jewellery that may go out of fashion in time. Instead, buy gold bars and coins from banks or jewellers. This is hallmark gold. So, you can be assured that you are getting pure gold and will not lose out on making charges when you go out to sell them for jewellery.

If investment in gold as an asset class is on your mind, this form of paper gold is perhaps the best way of investment as financial planners unanimously concede. All you need is a demat account and you can start with your investment.

You need a demat account to transact online in this fund and you also get to take physical delivery of gold albeit on some conditions. Your regular demat account will not work as you will need to have an account with one of the empanelled depository participants. E-gold was a platform launched by the National Spot Exchange (NSEL), which also offers a similar investment option on silver and platinum as well.

Hedging through gold futures is not much of an investment but is used by those who trade in gold. What these futures essentially do is they protect you against a future price hike. For instance, if the price of one unit of gold is Rs 31,000/10 gm now and a future with a tenure of three months is available at a price of Rs 31,500/10 gm, you can lock yourself at this price and protect yourself against price fluctuations in the short term.

Composition of Gold Holdings (as at end-December 2010)

Composition of gold holdings( as at March 2012)

Real and Nominal price of international gold

International and Domestic price of spot gold – increasing pattern observed

Review of Gold in 2012 in terms of US dollarsThe gold price started into the year 2012 at US dollars 1,531 per ounce. Over the full year 2011 the price of gold had increased by nearly 9% despite the two dips in September and November/ December. This made 2011 the tenth consecutive year in which the gold price increased.By December 31st, 2012 the gold price has further increased – amid high volatility – to roughly US dollars 1,657, i.e. by more than 8% from the beginning of 2012. In euro terms the price increase was nearly 6% over the same period.

Uses of gold in today’s world other than investment for profit returns.

The World Gold Council is a non-profit association of the world's leading gold mining companies, established in 1987 to promote the use of gold. It aims to stimulate demand for gold from industry, consumers, and investors

The Reserve Bank of India (RBI) in September,2012 directed all non-banking finance companies (NBFCs) not to sanction loan beyond 60 per cent of the value of gold jewellery.

Incidentally the directive follows government proposing a hike in import duty on the precious metal and imposition of excise duty on unbranded-jewellery.

RBI makes an attempt to minimize demand for gold loan and hence, a demand for gold in the process.

CONCLUSIONThe Economic Advisory Council made the recommendation in its review of the economy that the government discourage gold purchases and instead provide incentives for investment in financial assets because gold accentuates the current account deficit and hence, import of the yellow metal is unsustainable.Rising prices of the precious metal, over 60% in dollar terms in the last couple of years, has bloated the country's import bill causing uneasiness among policy makers. The current account deficit is expected to be around $160 billion in the current year, with gold imports closer to $50 billion.

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