...WO R LD G O L D CO U NCI L UTILISATION OF BORROWED GOLD BY THE MINING INDUSTRY DEVELOPMENT AND FUTURE PROSPECTS Ian Cox, Ian Emsley Research Study No. 18 UTILISATION OF BORROWED GOLD BY THE MINING INDUSTRY DEVELOPMENT AND FUTURE PROSPECTS Ian Cox, Ian Emsley Research Study No. 18 April 1998 WO R LD G O L D CO U NCI L 2 CONTENTS The Authors..............................................................................................................4 Acknowledgements ................................................................................................5 Foreword ..................................................................................................................6 Introduction..............................................................................................................8 Summary ..................................................................................................................9 Part One The Growth in Mine Utilisation of Borrowed Gold ........................................11 The Case for Hedging ..........................................................................................15 Hedging Instruments – Their Development and Usage ................................19 Australia ................................................................................................................21 North America ..................................................................................................
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...Article Name: Japanese Rush to Sell Gold as Price in Yen Jumps Article Address: http://online.wsj.com/article/SB10001424127887323820304578412283865306950.html?mod=WSJ_business_AsiaNewsBucket#articleTabs%3Darticle Review: The news shows when Japanese currency Yen is softening, the gold price is rising in Japan, which causes Japanese families rush to sell gold to gain more money. The phenomenon may indicate that the gold demand in Japan is slightly elastic in this period. As an abandoned currency, gold is not necessary for trading in modern life. People usually use gold for jewelries and investment. Hence, the normal demand of gold is even, and the purchase happens only when consumers have excess money for it. When Yen is declining, the price of gold in Japan increases. Higher gold price force the Japanese families reduce their needs for gold, and sell it to get more benefits. From this procedure, it is clear that when gold price is raised, demand of gold will be reduced, which proves the gold demand in Japan has small elasticity now. However, if the devaluation of Yen continues, the price of gold will keep soaring, which means the demand of gold in Japan may change into inelastic. In other words, Japanese families may start to buy gold in future, and the demand of gold will not be affected by the gold price. In conclusion, the gold demand in Japan is slightly elastic or sometimes inelastic. The reason for this situation might be gold is a luxury product. The public needs...
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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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...control the flow of money into the economy. When prices are dropping too fast, the government can "print" more money, slightly inflating the currency and steadying prices. However, when prices are rising too rapidly, the government can decrease the flow of money, making the currency slightly more valuable and steadying prices again. In the U.S., the Federal Reserve controls this by regulating banks, adjusting the flow of money into the economy, and lending capital to banks when necessary. To prevent massive financial panics the Fed has three specific tasks -- maximizing employment, stabilizing prices, and moderating long-term interest rates. Pretty much it wants to create a stable economy. 2. Pros and Cons Pros: * Our paper money is a "fiat" currency that can be printed without limit and has no real value – its value is only maintained by the "full faith and credit" of the government. Gold has real value due to its beauty, usefulness, and scarcity. * With a fiat currency the government can essentially manufacture money virtually out of nowhere. Since leaving the gold standard in 1971 US currency in circulation increased from $48.6 billion to over $1 trillion dollars in 2012. Between 1971 and 2003 the entire supply of money in the United States has increased by 1,100%. Under a gold standard, new money could only be printed if a corresponding amount of gold were available to back the currency. * Since leaving the gold standard in 1971, inflation has reduced the...
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...the palm oil price changes on the buyers and the sellers with the relation with the demand and the supply of the palm oil in the market. Gold h become the trend of nowadays and people tend to invest their money in gold to for the stability in future. Thus, the price of the gold is keeping increasing and the impact may not the same as the other kind of commodity such as crude oil and rubber. The few stock of gold in market and the investor attitude in keeping the gold gave the influence to the price in the market. As the gold is having the value on its on interior value, there is not much advancement of technologies in the industries. This supply will never increase in the market with the high demand each year especially on the festive seasons, thus, the gold price will always increase. Abstract Keywords: Gold, Commodity, Supply, demand, price. Introduction The articles “The Gold Rush is on” was cited from The Star Online written on 5 May 2011 by Vijenthi Nair. People are now rushing to by the gold as the price of the gold was kept on increasing each week. Even though the price is hiking non- stop gold lover is keep on hunting for the gold as they are fear the price will go even higher. The price increased has created the demand for gold to become higher as people have non-stop buying due to a lot of speculation created. In spite of it, people still hope for the price to go lower as they will buy more for the future investment. The increasing of the gold demand had...
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...Gold Price Forecast 2010 Predictions and Estimates from Multiple Analysts Goldman Sachs Gold Price Forecast — 2010 - $1,350 per ounce — 2011 - $1425 per ounce time Gold prices drop. — Stagflation 1 2 1 2 3 The Gold price forecast for the year 2010 has been covered by multiple analysts. Here is their consensus: As of December 3rd 2009, Goldman Sachs predicted these average prices: The reasons given for the estimates are as follows: Canaccord Adams Gold Estimation Bank of Nova Scotia Gold Analysis — Double-dipped recession Prediction of rising inflation — Near term outlook is $1,300 per ounce Natixis Price Per Ounce Prediction December 3rd 2009 brought about these guesses from Canaccord Adams: The reasons they feel the price of Gold will trade at these values are: Global stimulus packages are devaluing currency Gold becoming a popular way to both hedge and invest — Inflation or deflation — Dollar or bond crisis Low interest rates in 2010, expected near zero, will provide support for Gold. The price of Gold has a gamut of forecast ranges for 2010. A compilation of the predictions and estimates are listed below. On November 25th 2009, Natixis revealed their estimate on Gold prices in 2010 to be $950 per ounce. 2009 they released a range from $850 to $1,400 as the possible price per ounce the following year. economical woes. These are some of the caveats they see possibly coming: On one hand they felt that developing nations might prefer to invest in Gold as opposed to currency...
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...RM solutionChapter 5: Solutions to Problems 1. Suppose you buy a futures contract on BSE 30 Sensex futures at 16,500 on March 10. The initial margin is INR 8,500 and the maintenance margin is INR 5,000. At what futures price would you receive a margin call? Solution: Initial Margin = 8500 Maintenance Margin = 5000 Futures price = 16,500 Value per contract = 165,000 Margin call will be activated when the maintenance margin goes below 5,000, or the loss from futures exceeds 3,500. Since you bought Sensex futures, loss will arise if Sensex falls, and a loss of 3,500 will have to be made in order for a margin call to occur. Thus, margin call will be activated when the value of futures falls below 161,500, or Sensex falls below 16,150. 2. On January 2, when the futures contract on Jet Airways stock started trading for expiry on March 31, Kishore sold 10 contracts to Raghav, Raja sold 15 contracts to Jeeva, and Rama sold 20 contracts to Bose. On January 3, Jeeva bought 5 contracts from Raghav and Bose sold 10 contracts to Asjeet. Calculate the open interest in this contract on January 2 and January 3. Solution: Jan 2: Kishore sold 10 contracts Raghav bought 10 contracts Raja sold 15 contracts Jeeva bought 15 contracts Rama sold 20 contracts Bose bought 20 contracts Open interest: total sold contracts = 45 = total bought contracts. Jan 3: Jeeva buys 5 contracts Raghav sold 5 contracts Bose sold 10 contracts Asjeet sold 10 contracts Net position:...
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...old Price Forecast 2013 Predictions and Estimates from Multiple Analysts The Gold price forecast for the year 2013 has been covered by multiple analysts. Here is their consensus: While the price of Gold has a gamut of forecast ranges for 2013, most experts remain bullish on the yellow metal for the year, though some have scaled back their estimates slightly over the past few months. A compilation of their predictions are listed below. Bank of America Merrill Lynch In a December 2012 report, Bank of America Merrill Lynch stated that Gold would average $2,000 in 2013, with the metal climbing to $2,400 in 2014. “Large-scale policy easing by the U.S. Federal Reserve and European Central Bank positions Gold as a useful hedge against global macro and inflation risks taking the commodity to $2000/ oz levels”, said the bank. The bank added that, “We have a sixmonth [Gold price] target of $2000 an ounce, but see scope as well for prices to rise to $2400 an ounce by the end of 2014. These targets reflect our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist in December 2012.” BNP Paribas BNP Paribas expects Gold to average $1,865 an ounce for the year. “Market sentiment towards Gold has been much more uncertain in 2012 than was the case in previous years. Yet, we expect Gold to achieve a new record high in 2013 due to further monetary easing, less tail risk related to a breakup of the euro...
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...may no longer be the main currency of exchange in the world and may no longer be such a desired currency to hold. Many people would ask how and why a currency increases or decreases in value, the effects are to be considered when looking at gold standard. Money, although often thought of as only a medium of exchange, has a value of its own and is also a commodity, in the same way as oil, gold, silver, or corn are commodities (Feiler, Schilling). The price of money as a commodity is often determined or set as a result of government action and international trade. Value is determination by the foreign exchange markets of the world. The foreign exchange rates have a lot to do with it as well for example; Exchange rates respond directly to all sorts of events, both tangible and psychological—business cycles; balance of payment statistics; political developments; new tax laws; stock market news; inflationary expectations; international investment patterns; and government and central bank policies among others.( Federal At the heart of this complex market are the same forces of demand and supply that determine the prices of goods and services in any free market. If at any given rate, the demand for a currency is greater than its supply, its price will rise. If...
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...Gold as an investment option | | Mayank Chandola MBA in International BusinessSymbiosis Institute of International Business | | Table of Contents History of the yellow metal 2 Why it is attractive? 3 Portfolio diversifier 4 Inflation hedge 4 Investment risks in Gold 5 Risk with physical gold 5 Political Risks 5 Market Risks 5 Exchange rate risks 5 Demand/Supply side risks 5 Outlook 6 References 7 History of the yellow metal Gold has always been used as a medium of exchange for goods since ancient times and has not suffered devaluation in the same ways as paper currency. Gold has a record long history as a commodity and as a store of value. It has been formally a monetary media in and around the world. Gold has faced complete official demonetization long back, yet it experiences continued and renewed interest as a private or unofficial monetary medium. Even governments around the world are making greater use of gold in international financial affairs. Over time, gold has undergone three major transitions: 1. Gold was a medium of exchange in the early civilization 2. Next, an international banking system was developed around it, in which paper money was fully convertible into gold 3. This convertibility was ceased in 1971 by the then president Richard Nixon and a purely fiat money system took its place. Early civilizations equated gold with gods and rulers. Humans almost intuitively place a high value on gold, equating it with...
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...Price Forecast 2013 Predictions and Estimates from Multiple Analysts The Gold price forecast for the year 2013 has been covered by multiple analysts. Here is their consensus: While the price of Gold has a gamut of forecast ranges for 2013, most experts remain bullish on the yellow metal for the year, though some have scaled back their estimates slightly over the past few months. A compilation of their predictions are listed below. Bank of America Merrill Lynch In a December 2012 report, Bank of America Merrill Lynch stated that Gold would average $2,000 in 2013, with the metal climbing to $2,400 in 2014. “Large-scale policy easing by the U.S. Federal Reserve and European Central Bank positions Gold as a useful hedge against global macro and inflation risks taking the commodity to $2000/ oz levels”, said the bank. The bank added that, “We have a sixmonth [Gold price] target of $2000 an ounce, but see scope as well for prices to rise to $2400 an ounce by the end of 2014. These targets reflect our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist in December 2012.” BNP Paribas BNP Paribas expects Gold to average $1,865 an ounce for the year. “Market sentiment towards Gold has been much more uncertain in 2012 than was the case in previous years. Yet, we expect Gold to achieve a new record high in 2013 due to further monetary easing, less tail risk related to a breakup of the euro...
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...Harvard Business School 9-293-128 Rev. October 6, 1995 American Barrick Resources Corporation: Managing Gold Price Risk During 1992 the financial team of Toronto-based American Barrick Resources Corporation, one of the world’s fastest growing and most financially successful gold-mining concerns, met regularly to review strategic and tactical issues related to managing the firm’s exposure to gold price risk. Many major gold mines prided themselves on hedging none of the price risk of their output. If unhedged, a gold mine’s sole output, and hence its profits, cash flows, and stock price, were tied to gyrations in the price of gold. However, American Barrick had in place a gold-hedging program that was an integral and much publicized part of the firm’s corporate strategy. In an environment of falling gold prices, the firm’s hedge position had allowed it to profit handsomely and to sell its commodity output at prices well above market rates. For example, in 1992, American Barrick produced and sold over 1,280,000 ounces of gold at an average price of $422 per ounce, while the market price was about $345 per ounce.1 American Barrick’s gold-hedging program, and indeed all the corporate finance and treasury functions of the $4 billion market capitalization enterprise, were managed by a trio of relatively young but experienced financial executives: Gregory Wilkins (executive vice president and chief financial officer), Robert Wickham (vice president, finance), and Randall Oliphant...
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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 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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...results of how the stock performed from 3/5/12 to 3/16/12: We will discuss some stock analysis and the gain/loss later in this report. | Current | Date | Time | AMZN | 185.05 | 3/16/2012 | 1:28pm | XOM | 86.44 | 3/16/2012 | 1:29pm | GOOG | 625.4 | 3/16/2012 | 1:28pm | F | $12.51 | 3/16/2012 | 1:29pm | JNJ | $65.12 | 3/16/2012 | 1:28pm | Other than having five stocks, we have a put option for Procter & Gamble and a futures contract of Gold. b) Analyzing the futures contract of gold we bought at the beginning, March 2, 2012, it closed at $1,698 which meant our initial value was at $10,125 with a margin call at $7500. If it drops below that price then we would have to borrow money to bring it back up to the initial margin. On March 3, 2012, gold closed at $1702 resulting in a profit of 4 dollars per share increasing our profit by $400 and the resulting value of our gold became $10,525 On March 4, 2012, gold jumped another $3 resulting in a profit of $300 and an overall value of $10,825. On March 5, 2012, Gold raised $7 resulting in a profit of $700 and the value became $11,525. On March 6, the value dropped $5 dollars...
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