...FOR AND SUPPLY OF GOLD’’ CASE STUDY SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF MASTERS OF BUSINESS MANAGEMENT COURSE OF ALLIANCE UNIVERSITY SUBMITTED TO PROF DR.SAMIK SHOME (SENIOUR LECTURER) ALLIANCE BUSINESS SCHOOL SUBMITTED BY ABHISHEK M.R RAHUL CHARU BALDWA SHEIKH PARVESH T.SHAMEEL (2012-14, Section H) Group 01 LIST OF CONTENTS Serial Number | Contents | Page number | 1 | Executive summary | | 2 | Issue analysis | | 3 | Data analysis | | 4 | Key decision criteria | | 5 | Alternatives analysis | | 6 | Statistical data | | 7 | Non-Price factors | | 8 | Conclusion | | Executive summary India is one of the largest consumers of gold in the world. India’s share alone for the demand of gold comes to around 25%, which is a very large number considering there are around 200 countries in this planet. One of the main possibilities for this astronomical demand for gold in India might be because of the fact that gold plays a major role in Indian culture. Festivals like Diwali and AkshayaTritiya demand the use of the gold irrespective of the fact that gold is a very costly metal. Gold is a commodity which represents status symbol (conspicuous goods) The reasons why there is a mismatch between the demand and the supply of gold in India is quite obvious. Hutti gold mine company in Karnataka being the only company in India to mine and process gold ore and the fact that we recycle about 105 tonnes of gold per annum to meet...
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...factors played an important causal role, both in the worldwide decline of prices and output, and in their eventual recovery during the Great Depression. Bernanke also asserts that monetary shocks, or declines in the money supply, induced by the countries being on the gold standard were fundamental in causing the Great Depression and showing that nominal shocks indeed had real effects. Using research about the international gold standard during the Great Depression Era from Eichengreen, Bernanke was able to implement a comparative analysis of the experiences of different countries to reveal the importance of monetary forces (i.e. money supply)...
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...Part 1-Micro Economic Principles Applied Why do people spend hours lining up outside stores to purchase the iphone 5, when there are so many cheaper alternatives available? In recent months, an observation was made about consumer behaviour when it came to the purchasing of the recently released model of the iphone 5, by Apple Inc. The devices cost start at $199 us dollars and require a two year service plan. Why then, would persons stand in line for days, to acquire this device? In examining the demand and supply of the said product, statistics were researched to gain a better understanding of the reasoning behind such behaviour, and the opportunity cost attached. Information attained by Apple showed that the iphone 5 demands outstrips supply, as pre-orders shattered previous records, and some customers having to wait over a month to acquire the device. More than 2 million phones were bought in the first 24hours after apple took pre-orders. Customers lined up at the 356 retail stores across the US for days in advance. Why then, even after the fact that the phone is readily available across the US, would consumers behave in such a manner? It would seem that the actual supply of the iphone was limited, hence affecting the demand for the product. The features of the phone were advertised to be not significantly different from the phones previous model. The significant interest of the product was as a result of pent up demand, as some customers had been holding off their purchases...
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...Journal of Advanced Management Science Vol. 2, No. 1, March 2014 The Determinants of Gold Prices in Malaysia Siti Nurulhuda Ibrahim, Nurul Izzat Kamaruddin, and Rahayu Hasan Universiti Teknologi MARA, Bandaraya Melaka, Malaysia Email: {Sitinur304, nrl_izzat, rahayuhasan} @bdrmelaka.uitm.edu.my Abstract—This paper analysed factors that affecting the prices of gold in Malaysia. The study used Multiple Linear Regression Model to determined significant relationship between dependent and independent variables, covering data for 10 years period which are from 2003 until 2012. The researcher used three independent variables that affect the prices of gold which are crude oil prices, inflation rates and exchange rates. The empirical results have found there is negatively significant relationship between inflation rates and exchange rates on gold prices, while a crude oil price is positively significant. The results of the study are valuable for both academic and investor. Index Terms—determinant, gold prices, crude oil prices, inflation rates, exchange rates price and sell it at high price later on. Thus, this is why the factors that affect the gold price must be determined so that people may estimate the timing to buy, hold or sell the gold. This study is made to seek the proofs for the possible factors that affect the gold price in Malaysia. From this research, the most important or most influence factor can also be determined. Simply put, the findings for this research will bring...
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...in the price of gold. They used monthly gold price data January 1976 to December 1999 and applied Error Correction Model. If set of conditions have satisfied, the price of gold will rise over time at the general rate of inflation. Ranson (2005) tried to find out role of gold and oil as predictor of inflation. He found that gold price is more reliable barometer of the inflation than oil price because the effect on official inflation statistics, is reliably indicated by how far policy actions have allowed the price of gold to rise. Worthington and Pahlavani (2006) tested for the presence of a stable long-run relationship between the monthly price of gold and inflation in the United states from 1945 to 2006 and from 1973 to 2006. By applying unit root and modified cointegration test, they provided strong evidence of a cointegrating relationship between inflation and gold. This is in line with the view that gold can serve as an effective inflationary hedge. Levin and Wright (2006) tried to find out short-run and long-run determinants of the price of gold for the period January 1976 to August 2005. By using cointegration techniques they confirmed that the long-run price of gold moves only to the US price level, while short-run movements in the gold price were related to exchange rate, gold lease rate , gold’s beta, US inflation , US inflation volatility, credit risk and political uncertainty. Tully & Lucey (2007) investigated the relationship between gold prices and exchange...
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..."inflation" to refer to a rise in the price level. Rising in price and increase in money supply is two different meanings. The increases of money supply can also being called as monetary inflation while rising in price as price inflation. Economists generally agree that in the long run, inflation is caused by increases in the money supply. However, in the short and medium term, inflation is largely dependent on supply and demand pressures in the economy. In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects erosion in the purchasing power of money or in other word a loss of real value in the internal medium of exchange and unit of account in the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time. 2.0 THE EXISTENCE OF INFLATION AND HOW IT MEASURED In order to know whether the existence of inflation, we must analyze the demand supply curve and see how it can relate to an increase in price. That is if we do believe that any increase in price somehow relates to inflation. An increase in price does not necessarily must relate to inflation. The identifiers that are usually associated with price are demand, inflation and deflation...
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...determinants of the gold price in Malaysia RESEARCH OBJECTIVES 1. To determine the relationship between USD-MYR exchange rate on the Malaysian gold price. 2. To determine the relationship between the price of crude oil on the Malaysian gold price. 3. To determine the relationship between the Malaysian Gross Domestic Product on the Malaysian gold price 4. To determine the relationship between inflation rate on the Malaysian gold price. 5. To determine what are the stronger factors influencing the price of gold in Malaysia LITERATURE REVIEW There are number of group studies literature related with the functions gold has in the economy. The first group includes the literature showing how gold price is affected by macroeconomic news (Dooley et al., 1995; Fortune, 1987; Sherman, 1983; Sjaastad and Scacciallani, 1996; Wang and Lee, 2011). These studies investigate the relation of gold price with economic variables which includes inflation, interest rate, exchange rate etc. Second group includes the literature focusing on the examined the influencing factors in the variations of the gold price (Diba and Grossman, 1984; Pindyck, 1993; Baker and Tassel, 1985). Third group includes the literature aiming on the advantage of using gold in diversifying risk for a long-run portfolio (Chua et al., 1990; Sherman, 1986; Michaud et al., 2006; Ciner, 2011; Jaffe, 1989). Fourth group includes the literature focusing on the inflation hedging effectiveness of gold (Kolluri, 1981;...
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...Do Soaring Price and Mounting Demand in Indian ... Ref. No.: ME0006 Do Soaring Price and Mounting Demand in Indian Gold Market Speak of a Paradox? Demand for gold is a widespread observable fact across the world. However, the major demand for gold comes from five countries, namely India, Italy, Turkey, US and China. Among these countries, which account for 55% of the total gold demand, India’s share alone comes to around 25%. Cultural and religious traditions involving wearing of jewellery play a major role in influencing Indian gold demand. Around 75% of the world demand for gold is jewellery-based and the rest 25% is investment based. Speaking about India’s fondness for gold, Lord John Maynard Keynes is alleged to have remarked, “India’s gold consumption reflects the ‘ruinous love of a barbaric relic’.”1 In India, there is a huge mismatch between demand for and supply of gold. Hutti Gold Mine Company located in Karnataka is the only company in India, which produces gold by mining and processing the gold ore. It produces around 3 tonnes of gold per year. Another source of supply of gold in India has been coming from recycled jewellery/scrap jewellery. In 2006, it was reported that, “Over the past five years, Indians have recycled an average of 105 tonnes of gold per annum.”2 To meet the bulk of the demand, India imports gold. India imports around “700 tonnes of gold a year”.3 In October 2008, demand for gold increased. While this increase in demand for gold was attributed...
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...rigid adherence to the gold standard "caused" the crash and depression of 1929-39 and beyond. But, as Bernanke and Liaquat admit, the central bankers of the post-war period in somes cases (France and the US quite openly and purposefully) "sterilized" their gold so that the money supply did not expand when needed but in fact contracted. So it was a failure to follow the gold standard rather than gold itself which was the culprit. Nor do either Bernanke nor Ahamed explain why the gold standard worked quite well for a century before WW1, although Bernanke admits that is an "unexplained" issue. While acknowledging the long history of the gold standard and its importance in the development of central banking, Ben Bernanke made crystal clear that we're never going back to the gold standard. He explained that the argument supporting the gold standard has two parts: 1) the "desire to maintain the value of the dollar"—implying a "desire to have very low price stability, and 2) an aversion to allowing "the central bank to respond with monetary policy to booms and busts," explaining that "the advocates of the gold standard don't want to give the central bank that power." But regardless of the impetus for these arguments, he explains, a return to the gold standard now "would not be practical for monetary reasons or policy reasons": Bernanke pointed out various reasons that there's simply "not enough gold" to sustain today's global economy. First, extracting gold from the ground is a costly...
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...Abstract The economic instabilities and crisis which have direct effect on the well-being of the people in the society are caused by many issues and variables. People can work to earn income and improve their lives through all difficulties in the economic conditions. People also save some of their income for their future needs. Their save money would be affected by inflation and their purchasing power would be diminished. Inflation is mostly a matter of monetary policy which occurs when a government prints money without real asset backup more than the amount that is need for a stable economy. This study examined the effects of implementation of Islamic currency on the prevention of inflation and price instabilities. Economic students of IIUM were randomly given questionnaires about the agreeability of Islamic currency in today’s developed economy and its usefulness to prevent inflation. The survey showed that Islamic currency model (dinar and dirham) would be able to control inflation and instabilities of prices by having 100 percent of gold and silver reserves for every single amount of money circulating in the economy. Moreover, it is emphasized that Islamic governments should implement this model to overcome the problems people are facing by inflation which diminishes their purchasing power of saved money and their uncertainty in future investments. Keyword: Fiat money, Islamic currency, perception, inflation, economic growth. Islamic currency: The perception of IIUM...
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...International Journal of Applied Business and Economic Research, Vol. 9, No. 2, (2011): 145-165 STUDY ON DYNAMIC RELATIONSHIP AMONG GOLD PRICE, OIL PRICE, EXCHANGE RATE AND STOCK MARKET RETURNS K. S. Sujit1 and B. Rajesh Kumar2 Abstract: The dynamic and complex relationship among economic variables has attracted the researchers, policy makers and business people alike. This study is an attempt to test the dynamic relationship among gold price, stock returns, exchange rate and oil price. All these variables have witnessed significant changes over time and hence, it is absolutely necessary to validate the relationship periodically. This study takes daily data from 2nd January 1998 to 5th June 2011, constituting 3485 observations. Using techniques of time series the study tried to capture dynamic and stable relationship among these variables using vector autoregressive and cointegration technique. The results show that exchange rate is highly affected by changes in other variables. However, stock market has fewer roles in affecting the exchange rate. In this study we tested two models and one model suggests that there is weak long term relationship among variables. JEL classification: C22; E3; Keywords: Unit root tests; granger causality test, Cointegration; Vector auto regression (VAR) INTRODUCTION Gold was one of the first metals humans excavated. Gold as an asset has a hybrid nature: it is a commodity used in many industries but also it has maintained throughout history a unique...
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...GOLD STANDARD The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price. England adopted a de facto gold standard in 1717 after the master of the mint, Sir Isaac Newton, overvalued the guinea in terms of silver, and formally adopted the gold standard in 1819. The United States, though formally on a bimetallic (gold and silver) standard, switched to gold de facto in 1834 and de jure in 1900 when Congress passed the Gold Standard Act. In 1834, the United States fixed the price of gold at $20.67 per ounce, where it remained until 1933. Other major countries joined the gold standard in the 1870s. The period from 1880 to 1914 is known as the classical gold standard. During that time, the majority of countries adhered (in varying degrees) to gold. It was also a period of unprecedented economic growth with relatively free trade in goods, labor, and capital. The gold standard broke down during World War I, as major belligerents resorted to inflationary finance, and was briefly reinstated from 1925 to 1931 as the Gold Exchange Standard. Under this standard, countries could hold gold or dollars or pounds as reserves, except for the United States and the United Kingdom, which held reserves only in gold. This version broke down in 1931 following Britain’s departure from gold in the...
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...Applied Scientific Research www.textroad.com Factors Affecting the Price of Gold in Malaysia Hanif Zakaria, Nabilah Abdul Shukur, Salwani Affandi, Wan Mansor Wan Mahmood Faculty of Business Management Universiti Teknologi MARA, Dungun, Terengganu, Malaysia Received: March 9, 2015 Accepted: June 16, 2015 ABSTRACT Gold is a precious metal which serves as both financial and real assets. The value of gold in the society goes more than just economic, as it is also treasured as a storage and display of mammon and culture.Of late, the price of gold is not stable in which it tends to oscillatecontingent on the economic condition. In the long-run, its prices keep increasing due to high demand and inadequate supply worldwide. However, in the short-run, its price seems to be volatile due to various potential reasons. Therefore, this study was conducted to determine the factors influencing gold prices in Malaysia. In order to achieve the objective, Stata software was used to assess the prospective relationships between the gold prices as the dependent variable and the inflation rate, interest rate and exchange rate as independent variablesby using Pooled Ordinary Least Squares (POLS) methodology. The monthly data employed in this study spans across a 14 years period from year 2000 until 2013. The results revealed that the rates of inflation, exchange and interest were significantly related with gold prices in Malaysia in different magnitude and direction.It is empirically...
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...Do Soaring Price and Mounting Demand in Indian ... Ref. No.: ME0006 op y Do Soaring Price and Mounting Demand in Indian Gold Market Speak of a Paradox? Demand for gold is a widespread observable fact across the world. However, the major demand for gold comes from five countries, namely India, Italy, Turkey, US and China. Among these countries, which account for 55% of the total gold demand, India’s share alone comes to around 25%. Cultural and religious traditions involving wearing of jewellery play a major role in influencing Indian gold demand. Around 75% of the world demand for gold is jewellery-based and the rest 25% is investment based. Speaking about India’s fondness for gold, Lord John Maynard Keynes is alleged to have remarked, “India’s gold consumption reflects the ‘ruinous love of a barbaric relic’.”1 No tC In India, there is a huge mismatch between demand for and supply of gold. Hutti Gold Mine Company located in Karnataka is the only company in India, which produces gold by mining and processing the gold ore. It produces around 3 tonnes of gold per year. Another source of supply of gold in India has been coming from recycled jewellery/scrap jewellery. In 2006, it was reported that, “Over the past five years, Indians have recycled an average of 105 tonnes of gold per annum.”2 To meet the bulk of the demand, India imports gold. India imports around “700 tonnes of gold a year”.3 In October 2008, demand for gold increased. While this increase...
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...A.H.) Monetary Dynamics and Gold Dinar: An Empirical Perspective MANSOR H. IBRAHIM* Professor of Economics International Islamic University Malaysia, Malaysia E-mail: mansorhi@iiu.edu.my. ABSTRACT. According to proponents of Gold Dinar particularly Meera and Aziz (2002), termed as Dinarists’, the fiat monetary system is inherently unstable. In providing an empirical perspective on this contention, this paper investigates monetary dynamics of a Muslim economy, Malaysia. To this end, the paper adopts a vector autoregressive (VAR) framework to document dynamic interactions between money supply and various macroeconomic variables including real output, price level, interest rate and stock prices. The results seem to provide some support for the Dinarists’ contention. First, the results portray clearly an important causal role of money supply for other macroeconomic variables. Second, we document some evidence that expansion in money supply is inflationary. Lastly, money supply – interest rate and money supply – stock price interactions are destabilizing. More importantly, expansion in money supply has the potential of breeding asset price bubbles. However, apart from the above findings, we also find that money supply reacts positively to increase in real output. Since the accommodative role of money supply is necessary or a pre-condition for expansion in production, arguments for Gold Dinar need to be qualified. Moreover, the viability of Gold Dinar comes into question when political...
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