Overview
History and background of gold and gold market
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 (Chemical Symbol-Au) is primarily a monetary asset and partly a commodity.
- Gold is the world's oldest international currency.
- Gold is an important element of global monetary reserves.
- With regards to investment value, more than two-thirds of gold's total accumulated holdings is with central banks' reserves, private players, and held in the form of high- karat jewellery.
Less than one-third of gold's total accumulated holdings are used as “commodity” for jewellery in the western markets and industry.
Demand and Supply Scenario
- Gold demand in 2017 reached a 10-year high of 4159 tonnes, worth US$175billon, as a result of;
strong growth in jewellery demand;
the revival of the Indian market;
strong momentum in Chinese gold demand and
- In 2010, India was the world's largest gold consumer with an annual demand of 963 tonnes.
The total supply of gold coming onto the market in 2010 reached 4,108 tonnes, a rise of 2% from 2009 levels.
Global Scenario
- London is the world’s biggest clearing house.
- Mumbai is under India's liberalised gold regime.
- New York is the home of gold futures trading.
- Zurich is a physical turntable.
- Istanbul, Dubai, Singapore, and Hong Kong are doorways to important consuming regions.
Indian Scenario
- India is the largest market for gold jewellery in the world. 2010 was a record year for Indian jewellery demand; at 745.7 tonnes, annual demand was 13% above the previous peak in 1998. In local currency terms, Indian jewellery demand more than doubled in 2010.
- A 20% rise in the rupee price of gold combined with a 69% rise in the volume of demand, pushed up the value of gold demand by 101% to ₹1,342 billion. This compares with 2009 demand of ₹669 billion
Factors Influencing the Market
- Above ground supply of gold from central bank's sale, reclaimed scrap, and official gold loans.
- Hedging interest of producers/miners.
- World macroeconomic factors such as the US Dollar and interest rate, and economic events.
- Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring, all affect metal prices.
- In India, gold demand is also determined to a large extent by its price level and volatility.