My Proj

A DETAILED STUDY ON COMMODITY MARKET AS AN
ALTERNATIVE INVESTMENT AVENUE WITH REGARD TO

BULLION MARKET (GOLD AND SILVER)."
Submitted in Partial fulfillment of the requirement for the award of the

Degree of Bachelor of Business Administration
of Christ University
By
Akshat Bijlani
Reg. No. 08D1611
Under the guidance of

Mrs Leena James
Department of Management Studies

CHRIST UNIVERSITY
Bangalore
2010 – 2011
DECLARATION
I declare that this project titled, “A DETAILED STUDY ON

COMMODITY MARKET AS AN ALTERNATIVE INVESTMENT
AVENUE WITH REGARD TO BULLION MARKET (GOLD AND
SILVER)." is a record of bonafide research carried out by me under the
supervision of Mrs. Leena James, Department of Management studies,
Christ University, Bangalore.
I further declare that this has not previously formed the basis of the
award of any degree, diploma or other similar title of recognition.
Place:________________________
Date:_________________________
Akshat Bijlani
08D1611
CERTIFICATE
This is to certify that “ Akshat Bijlani, Register No. 08D1611” is a bonafide

student of VI Semester BBA Programme studying in this institution.
He has prepared and submitted a project report titled “A DETAILED STUDY

ON COMMODITY MARKET AS AN ALTERNATIVE INVESTMENT
AVENUE WITH REGARD TO BULLION MARKET (GOLD AND SILVER)”, in
partial fulfillment for the requirement of Bachelor of Business Administration
Programme of Christ University, for the academic year 2010-2011.
Place: Bangalore Dr. Jain Mathew

Date: HOD
Dept. of Management
Studies
GUIDE CERTIFICATE
This is to certify that this project report titled “A DETAILED STUDY ON

COMMODITY MARKET AS AN ALTERNATIVE INVESTMENT AVENUE
WITH REGARD TO BULLION MARKET (GOLD AND SILVER)” submitted to
the Christ University in partial fulfillment of the requirement for the award of the
Degree of Bachelor of Business Administration, is a record of the original and
independent work carried out by Akshat Bijlani under my guidance and supervision.
This has not previously formed the basis of the award of any degree, diploma
or other similar title of recognition.
Place: Bangalore
Date: Leena James
ACKNOWLEDGEMENT
I would like to express my profound gratitude to all those who have been
instrumental in the preparation of this project report. I wish to place on records, my
deep gratitude to my project guide Mrs Leena James, a highly esteemed and
distinguished guide, for her expert advice and help.
I would like to thank Dr. (Fr). Thomas.C.Mathew, Vice Chancellor and Dr.
Jain Mathew, HOD, for their support
I am deeply grateful to my friends who helped me to by him to conduct this
study, advising me on this project report and furnishing the required information.
Lastly, I would like to thank God, my Parents for their constant help and support.
Akshat Bijlani
Register No. 08D1611
TABLE OF CONTENTS
CHAPTER NO CHAPTER NAME PAGE NO
i. LIST OF TABLES
LIST OF GRAPHS
1 INTRODUCTION
1.1 INTRODUCTION TO COMMODITY
MARKET
1.1(1) COMMODITY MARKET
1.2 HISTORY OF COMMODITY MARKET
1.2(1) INTRODUCTION OF COMMODITY MARKET

TO INDIA
1.3 EVOLUTION OF COMMODITY MARKET IN

ECONOMY
1.4 GROWTH OF COMMODITY MARKET
1.5 ROLE OF COMMODITY MARKET
1.6 HOW TO START TRADING IN COMMODITY

MARKET
1.7 HOW ARE COMMODITIES TRADED
1.7(1) FUNDAMENTAL ANALYSIS
1.7(2) TECHNICAL ANALYSIS

WHO PARTICIPATES IN COMMODITY MARKET
1.8
HEDGER
1.8(1)
SPECULATOR
1.8(2)
PLAYERS INVOLVED IN THE
1.9 COMMODITYMARKET
COMMODITY TRADING SYSTEM

1.10
TREND BASED COMMODITY SYSTEM
1.10(1)
RANGE BASED COMMODITY SYSTEM
1.10(2)
FUTURES CONTRACT
1.11
NCDEX - NATIONAL COMMODITY AND
DERIVATIVES EXCHANGE
1.12
MCX- MULTI EXCHANGE OF INDIA LIMITED
1.13
GOLD
1.14
WHY GOLD
1.15
INDIAN GOLD MARKET
1.16
GOVERNMENT POLICY
1.16(1)
DEMAND FOR GOLD
1.17
JEWELLERY DEMAND
1.17(1)
1.17(2) INVESTMENT DEMAND
1.17(3) INDUSTRIAL DEMAND
1.18 METHODS OF INVESTING IN GOLD
1.18(1) EXCHANGE TRADED FUNDS
1.18(2) COINS AND SMALL BARS
1.18(3) GOLD ACCOUNT
1.18(4) GOLD CERTIFICATES
1.18(5) GOLD ORIENTED FUNDS
1.18(6) STRUCTURED PRODUCTS
1.19 PRICE DETERMINATION
1.20 MARKET PLAYERS
1.21 SILVER
1.22 INDIAN SILVER MARKET
1.23 DEMAND
1.23(1) INDUSTRIAL DEMAND

1.23(2) JEWELLERY AND SILVERWARE
1.23(3) PHOTOGRAPHY
1.24 GOVERNMENT POLICY
1.25(1) BARS
1.25(2) COINS
1.25(3) ROUNDS
1.25(4) CERTIFICATES
1.25(5) ACCOUNT
1.25(6) EXCHANGE TRADED FUNDS
1.25(7) SPREAD BETTING
1.25(8) DERIVATIVES
1.25(9) MINING COMPANIES
1.26 SILVER PRICE
1.27 MARKET INFLUENCING FACTORS
1.28 MARKET PLAYERS
2 RESEARCH DESIGN
2.1 TITLE OF THE PROJECT
2.2 STATEMENT 0 THE PROBLEM
2.3 OBJECTIVES OF THE STUDY
2.4 SCOPE OF THE STUDY
2.5 DATA COLLECTION METHODS
2.6 LIMITATIONS
3 ANALYSIS AND INTERPRETATION OF DATA GOLD

AND SILVER
3.1 BASED ON PRICES OF GOLD AND SILVER IN THE
COMMODITY MARKET
3.1(1) THE PRICE OF GOLD IN THE YEAR 2008-2009
3.1(2) SILVER 2004
3.1(3) SILVER 2006
3.1(4) SILVER2008
3.1(5) SILVER 2009
3.1(6) 10 YEAR GRAPH OF GOLD PRICE FIXATION
3.1(7) 10 YEAR GRAPH OF SILVER FIXATION
3.1(8) PRICE OF GOLD OF PAST 10 YEARS
3.1(9) PRICE OF SILVER OF PAST 10 YEARS
3.2 BASED ON QUESTIONNAIRES GIVEN TO

INVESTORS
3.2(1) THE INVESTORS INVEST THE MOST
3.2(2) THE MARKET WHICH IS MORE RISKY
3.2(3) EXISTANCE OF TRADING IN COMMODITY

MARKET BY INVESTORS
3.2(4) GROWTH OF COMMODITY MARKET IN

COMING YEARS
3.2(5) THE RATING OF COMMODITY MARKET WHEN

COMPARED WITH STOCK MARKET AS GIVEN BY
INVESTORS
3.2(6) FREQUENCY OF TRADING IN COMMODITY

MARKET
3.2(7) THE RETURN ON INVESTMENT WHEN COMPARED

WITH OTHER MARKETS
3.2(8) IS COMMODITY MARKET MEANT FOR DAILY

TRADING
3.2(9) THE COMMODITIES THE INVESTORS TRADE THE

MOST
3.2(10) THE EXCHANGE THROUGH WHICH THEY TRADE
3.2(11) THE TRADING IN BULLION MARKET

3.2(12) THE TRADING SYSTEM INVESTORS FOLLOW
3.2(13) PROTECTION AGAINST PRICE VOLATILITY IN THE

COMMODITY MARKET
3.2(14) THE PERIOD OF INVESTMENT FOR HIGH RETURN
3.2(15) TRADE THROUGH OWN ACCOUNT
4 SUMMARY OF FINDINGS
LIST OF TABLE
TABLE NUMBER TABLE NAME PAGE NUMBER
Ti INDIAN COMMODITY MARKET TILL NOW
T2 THE INVESTORS INVEST THE MOST
T3 THE MARKET WHICH IS MORE RISKY
T4 EXISTANCE OF TRADING IN COMMODITY

MARKET BY INVESTORS
T5 GROWTH OF COMMODITY MARKET IN

COMING YEARS
T6 THE RATING OF COMMODITY MARKET

WHEN COMPARED WITH STOCK
MARKET AS GIVEN BY INVESTORS
T7 FREQUENCY OF TRADING IN
COMMODITY MARKET
T8 THE RETURN ON INVESTMENT WHEN

COMPARED WITH OTHER MARKETS
T9 IS COMMODITY MARKET MEANT FOR

DAILY TRADING
T10 THE COMMODITIES THE INVESTORS

TRADE THE MOST
Ti 1 THE EXCHANGE THROUGH WHICH THEY

TRADE
T12 THE TRADING IN BULLION MARKET
T13 THE TRADING SYSTEM INVESTORS

FOLLOW
T14 PROTECTION AGAINST PRICE 85

VOLATILITY IN THE COMMODITY
MARKET
T15 THE PERIOD OF INVESTMENT FOR HIGH
RETURN
TRADE THROUGH OWN ACCOUNT
LIST OF GRAPH
GRAPH GRAPH NAME PAGE

NUMBER NUMBER
Gl THE PRICE OF GOLD IN THE YEAR 2008-2009 50

G2 SILVER 2004 52
G3 SILVER 2006 53
G4 SILVER 2008 54
G5 SILVER 2009 55
G6 10 YEAR GRAPH OF GOLD PRICE FIXATION 56
G7 10 YEAR GRAPH OF SILVER FIXATION 57
G8 PRICE OF GOLD OF PAST 10 YEARS 58
G9 PRICE OF SILVER OF PAST 10 YEARS 59

G10 THE INVESTORS INVEST THE MOST 61
G il THE MARKET WHICH IS MORE RISKY 62
G12 EXISTANCE OF TRADING IN COMMODITY 65
MARKET BY INVESTORS
G13 GROWTH OF COMMODITY MARKET IN 67
CQMMGLYEARS
G14 THE RATING OF C700MMODITY MARKET
WHEN COMPARED WITH STOCK MARKET AS
GIVEN BY INVESTORS
G15 FREQUENCY OF TRADING IN COMMODITY
MARKET
G16 THE RETURN ON INVESTMENT WHE N COMPARED
WITH OTHER MARKETS
G17 IS COMMODITY MARKET MEANT FOR DAILY

TRADING
G18 THE COMMODITIES THE INVESTORS TRADE THE
MOST
G19 THE EXCHANGE THROUGH WHICH THEY TRADE
G20 THE TRADING IN BULLION MARKET
G21 THE TRADING SYSTEM INVESTORS FOLLOW
G22 PROTECTION AGAINST PRICE VOLATILITY IN THE
COMMODITY MARKET
G23 THE PERIOD OF INVESTMENT FOR HIGH RETURN
G24 TRADE THROUGH OWN ACCOUNT
CHAPTER 1
INTRODUCTION
1.1 COMMODITY
A commodity can be defined as an article, a product or a material that is brought and

sold it can be classified as every kind of movable property, accept actionable claims,
money and securities.
Commodities are broadly defined as natural resources, chemicals and physical
products you can touch, taste, smell, grow, mine, consume or deliver.
From their origins in the 1800s until the 1970s, commodities and futures markets
were one in the same; financial futures are a modern-day invention. To confuse things
slightly, today the term "commodities" is still often used as a broad industry term
describing all futures commodity contracts, including financials. For example,
"commodity trading advisor" is used to define an individual or firm who operates a
managed futures program, even though many of them trade exclusively in the
financial futures markets such as interest rates or stock indexes.
The most popular contracts for commodity trading cover several broad categories:
metals, energy, grains, livestock, and food and fibre. These are not paper assets, and
in general, are produced and consumed at a price based on the forces of supply and
demand.
A commodity futures contract represents an agreement to buy or sell a specific type
and grade of commodity for delivery at a specific time in the future at an agreed upon
place at a market-determined price. In reality, commodity futures rarely lead to the
delivery of an actual product, because the contract positions are typically closed out
before the delivery date.
Commodities actually offer immense potential to become a separate asset class of
market-savvy investors, arbitragerous and speculators. Retail investors, who claim to
understand the equity markets, may find commodities and unfathomable market but
commodities are easy to understand as far as fundamentals of demand and supply are
concerned retail investors should understand the risk and advantages of trading in
commodities future before taking a leap. Historically pricing in commodities future as
been less volatile compared with equity and bond, their providing an efficient
portfolio diversification option.
Infact, the size of the commodity market in India is also quite significant of the
country's GDP of Rs 13,20,730 crore [Rs 13,207.3billion], commodities related [and
independent] industries constitute about 58% currently the various commodities
across the country clock an annual turn over of rs 1,40.000 crore [Rs 1,400 billion].
With the introduction of future trading the size of the commodity market grow many
folds here on.
Commodities are the actual physical goods like corn, Soya bean, gold, crude oil.
Futures are contracts of commodities that are traded at a future exchange like the
Chicago board of trade. Trading commodities that encompass physical products are
the roots of today's commodity futures industry and still play a valuable role in the
global marketplace, even though the most highly traded futures today are financial
contracts such as U.S. Treasury notes, Eurodollars, and Standard & Poor's 500®.
1.1(1) COMMODITY MARKET
It is an important constitute of financial market of any country. It is the market where
a wide range of products that is precious metals, basemetals, crude oil, energy and
soft commodities like palm oil, coffee etc are traded on regulated commodities
exchange in which they are brought and sold in standardized contracts. . It is
important to develop a vibrant active and liquid commodity market. This would help
investors hedge their commodity risk, take speculative position in commodities and
exploit arbitrage opportunities in market.
1.2 HISTORY
The modern commodity markets have their roots in trading of agricultural products,
while wheat and corn, cattle and pigs were widely traded using standard instruments
in the 19th century in united states other basic food stuffs such as soyabeans were only
added quite recently to be established there must be very broad consensus on the
variations in the product that make it acceptable for one purpose or another.
The economic impact of the development of commodity market is hard to over
estimate. Through the 19th century the exchange became effective spokes men for
and innovations of improvements in transportation warehousing and financing which
paved the way to expanded inter state and international trade.
Early history of commodity market historically dating from ancient Sumerian use of
goods, or other peoples using pig's rare seashells or other items as commodity many
people have sought ways to standardization trade contracts in the delivery of such
items to render trade itself more smooth and predictable.
Commodity money and commercial market in a crude early form are believed to have
originated in summer where small baked clay tokens in the shape of sheep and goats
were used in trade sealed in clay vessels with a certain number of such tokens with
that number written on the outside they represented a promise to deliver that number.
This made them a form of commodity money more than an "I owe you' but less than a
guarantee by a nation state or bank. However they were also known to contain
promises of time and date of delivery this made them like a modern futures contract.
Regardless of the details it was only possible to verify the number of tokens inside by
shaking the vessels or by breaking it at which point the number or terms written on
the outside became subject to doubt. Eventually the tokens disappeared, but the
contracts remained on flat tables. This represented the first system of commodity
accounting.
However the commodity statue of living things is always subject to doubt it was hard
to validate the health or existence of sheep or goats excuses for non delivery were not
unknown and these are recovered. Sumerian letters that complain of sickly goats,
sheep that had already been fleeced etc...
If seller's reputation was good in divided "backers or bankers" could decide to take the
risk of "clearing" a trade. The observation that trust is always required between
money market participants later led to credit money but until relatively modern times,
communication and credit were primitive.
Classical civilizations built complex global markets trading gold and silver for spices,
cloth wood and weapons most of which had standards of quality and time crisis
considering the money hazards of climate, piracy, theft and abuse of military fiat by
rules of kingdoms along the trade routers it was a major forces of these civilizations to
keep markets open and trading in these scarce commodity reputation and clearing
became central concerns and the states which could handle them most effectively
became very powerful empires trusted by many people to manage and meditate trade
and commerce.
1.2(1) INTRODUCTION OF COMMODITY MARKET IN INDIA

India a commodity based economy where 2/3r of one billion population depends on
agricultural commodities surprisingly has an underdeveloped commodity market,
unlike the physical market future market trade in commodity are largely used as risk
management mechanism on either physical commodity itself or open position in
commodity stock .
1.3 EVOLUTION IN INDIA

Bombay cotton trade association limited set up in 1875 was the first organize Futures
market. Bombay cotton exchange limited was established in 1893 following the wide
spread disconnect amongst leading cotton mill owners and merchants over
functioning of Bombay cotton trade association. The future trading in oil seeds started
in 1990 with the establishment of Gujarathi Vyapari Mandali which carried on futures
trading in groundnut, castor seed and cotton. Futures' trading in wheat was existent at
several places in Punjab and Uttar Pradesh. But the most notable futures exchange for
wheat was chamber of commerce at Harpur set up in 1913. Futures trading in bullion
began in Mumbai 1920.Calcutta Hessian exchange limited was established in 1919
for futures trading in raw jute and jute goods. But organized future trading in raw jute
began only in 1927 with the establishment of East Indian jute association limited
.These two associations amalgamates in 1945 to form the east India jute and Hessian
limited to conduct organized trading in both raw jute and jute goods. Forward
contracts (regulation) act was enacted in 1952 and the forward market commission
[FMC] was established in 1953 under the ministry of consumer affairs and public
distribution. In due course, several other exchanges were created in the country to
trade in diverse commodities.
1.4 GROWTH OF COMMODITY MARKET

The Indian commodity market which expanded by 50 times in a span of 5 years from
Rs665.30 ($16.6 billion) in 2002 to Rs 33753.36 billion ($843.8 billion) in 2007, is
now expected to grow at a steady rate of about a 30% by 2010 and touch a volume of
Rs 74156.13 billion ($1853.9 billion) since people participation in such trade will
continue
The size of commodity trade in 2003 stood at Rs 1293.64 billion ($30.7 billion) which
there by went to Rs 5717.59 billion ($142.9 billion) in 2004 recording an increase of
341%
In 2005 the growth in commodities trade was by 276% as it went up at Rs21551.22
billion ($538.7 billion) however, in 2006 through the commodities trade increased to
Rs 27393.40 billion ($684.8 billion) it could register ear on year growth of 27% over
the last year. For 2007, the trade in commodity reached at Rs 33753.36 billion ($543.8
billion) and registered a Its president, Mr. Sajjan Jindal said that the growth in
commodities derivatives trading which was at massive level in the last five years
would now grow by about 30% to reach projected level of Rs74156.13 billion in the
next two years
The turnover as proportion to GDP of commodity trade increased from 4.7% in 2004
to 20% in 2007 and is expected to go up many folds since commodity market would
remain friendly to its subscribers. The daily average volume of trade in commodities
exchanges by December 2007 was over Rs 120 billion said Mr. Jindal.
Gold, silver and crude recorded the highest turnover in MCX while in NCDEX
soyabean and in NMCE pepper, rubber and raw jute were the most actively traded
commodities on an average this trend is likely to continue
T l. INDIAN COMMODITY MARKET UNTIL NOW
1875 Establishment of Bombay cotton trade association limited for future

trading in cotton contract
1900 Future trading in oil seeds and food grains
1912 Forward trading in raw jute and jute goods started at Calcutta
1913 Forward market in wheat at Harpur
1919 Government of Bombay passed Bombay contract control (war provision)

act and set up the cotton contract board to curb speculative trading
1920 Bullion market in Mumbai
1939 Government of Bombay issued an ordinance in September 1939

prohibiting option business
1943 Defiance of India act was utilized on large scale for the purpose of
prohibiting forward trading in some commodities and regulating such
trading in others on all India basis
Oil seeds forward contracts prohibition order was issued and forward
contract in oil was banned
1946 These orders were retained with necessary modification in the essential
supplies temporary power act 1946, after the Defence of India act had up
set
1947 Bombay forward contract control act 1947 was enacted with the view to
evolving the unified systems for trading in Bombay
1950 Constitution of India brought the subject of stock exchange and futures
market in the union list and thereafter it regulation trading in all the
commodity that the committee recommended except bullion and basmati
rice.
1995 Setting up of separate department of consumer affairs, this as been in
fore front of major initiative ingoing commodity futures
1998 Forward contract in cotton and jute goods were permitted
1999 Revival of derivatives trade in some major oil seeds such as
groundnuts mustard seed seasame cotton seed government approved
a committee under the chairman ship of Sri K.0 Mishra the chairman
of FMC to prepare a rid map for setting up the nation wide multi
commodity exchange
2000 The national agriculture policy in July 2000 announced that the
government would like to encourage future contract in a large
number of commodity to minimize the wide fluctuation commodity
price and also allow the hedging
2002 The finance minister in budget speech on February 28,2002 indicated
that the future and forward contract expanded to include all
agricultural commodities First national commodity exchange
NCDEX started in November
2003 APRIL 2003 the government of India issued a notification rescinding
all previous notification which prohibited future trading in large
number of commodities in the country In may 2003 notification was
issued to revoking the prohibition on non transferable specific
delivery forward contract becomes a subject matter of central
government
1952 In December 1952 ,forward contract regulation act, 1952 was
enacted and it became governing act for commodity trading in India
1953 Selling up of forward markets commodity in september1953, which
even now is the regulatory authority of Commodity derivatives
market in India
1954 Forward contact regulation rules were framed in July 1954
1960 Wide spread prevailed in many essential commodities, the
consequent inflationary pressure and the regulatory constrain resulted
in poor trades in these markets forward trading was banned in 1960
in all commodity except in pepper, turmeric, castor seeds and
linseed. This resulted virtual dismantling of commodity future
market.
1977 Future trading in castor seed and linseed was also suspended
1980 On the basis of the recommendation made by khusro committee
forwarded trading in potato and gur was allowed in early 1980s and
castor seed in 1985
1993 Kabra committee was set to examine the role of future trading in
commodity
1994 Kabra committee submitted its report and recommended the
resumption of future trading in 17 commodity groups. The
suggestion by the committee also included the need for strengthening
the forward market commodity and amendment Of the contract
regulation act. In response top these recommendations the
government of India permitted the future Amendments to the
essential commodity act securities contract rules which have reduced
bottleneck in the development and growth of commodity market.
NCDEX and MCX another two national level multi commodity
exchanges started its operation
NCDEX and MCX another two national level multi commodity
exchanges started its operation
2005 Introduction of VAT which would enable hassle free movement of
commodity across state and more unified tax regime which would
facilitate easier trading in commodities.
1.5 THE COMMODITY MARKET ROLE

The main role of future markets is to mallow two important groups. Commercial
commodity procedure and commercial commodity consumers to minimize the
potential of adverse future commodity price movements on their respective business
down the road. To begin to understand the important role of future market trading
consider the following.
In case of grain commodity like corn and wheat, the farmer and farm co operative
organizations are the commercial commodity procedure they plants harvest and sell
their corn.
Commercial commodity consumers could be cereal companies, bread manufactures
and other commercial firms who take the raw corn commodity retail end-
users/consumers like you.
All parties want something out of the deal. Upstream procedure wants to hedge crop
against potential failing prices when harvest time comes.
1.6 HOW TO START TRADING IN COMMODITIES,

In order to trade commodities you should educate yourself on the future contracts
specification for each commodity and of course learn about trading strategies.
Commodities have the same premise as any other investment you want to buy low and
sell high the difference with the commodities is that they are highly leveraged and
they trade in contract size instead of shares
1.7 HOW ARE COMMODITIES TRADED

In all futures trading, decisions are made in two ways - fundamental or technical,
although many traders use a combination of both
Fundamental Analysis
Fundamental analysis includes all factors that influence supply and demand. For the
commodities markets, fundamental factors include weather and geopolitical events in
producing countries—outside forces that influence price action. In financial futures
trading, factors such as Federal Reserve actions and economic reports are among
fundamental forces affecting prices.
Technical Analysis
Technical analysis is based strictly on inside market forces. It involves tracking

various price patterns that occurred in the markets in the past. Analysts focus on a
variety of time frames, and commodity trading decisions are based on past tendencies
with the idea these price patterns tend to repeat themselves. Technical analysis
involves a wide range of techniques, and a variety of market indicators are studied
including volume, open interest, momentum. Each individual analyst has his
favourite approach - technical analysis is just as much art as it is science. Buy or sell
the underlying commodities futures contract.
1.8 WHO PARTICIPATES IN COMMODITIES MARKET?
There are two basic types of participants in commodities markets-hedgers and

speculators. Hedgers seek to minimize and manage price risk, while speculators take
on risk in the hope of making a profit.
Hedger
As an example of a hedger, you might be a large corn farmer wanting to sell your
product at the highest possible price. However, unpredictable weather may create
risk, as well as excess supply that could drive prices down. You could take a short
position in corn futures, and if prices fall, you could then buy back the futures at a
lower price than you previously had sold them. This would help you offset the loss
from your cash crop and help minimize your risk. Of course, if prices rose, you'd lose
money on the futures transaction, but the idea is to use futures as a hedge.
Speculator
Including individual investors and professionals such as hedge funds or managed
futures traders, could take the opposite side of the hedger's futures transaction. That
participant would bear the risk that prices are going to rise in hopes of generating a
profit on the long futures position. Most likely, this type of speculator has no actual
stake in the business, other than futures trading. A commercial food producer in need
of the raw product {a breakfast cereal processor, for example) may also take the other
side of the short hedger's trade to offset the risk of paying higher prices for the
commodity. If the price of corn rises, the commercial food producer could still
capture a profit from the futures position, even though he'd be paying more for the
actual corn.
An individual trader who commits his or her own capital to act as speculator on a
particular exchange provide market liquidity by constantly buying and selling
throughout the trading session and are viewed as important participants in the market
by shouldering risk. While the term local has been used to designate those trading in
the open-outcry markets, this era of electronic trading is making the phrase a little
obsolete. However, their function as liquidity providers is equally important in
electronic markets. The Commodity Futures Trading Commission defines this new
breed of electronic traders "E-locals," but they are often more simply known as
independent traders.
1.9 PLAYERS INVOLVED IN COMMODITIES TRADING
1. Commercials: the entities involved in the production processing or

merchandising of the commodity for ex: both the corn farmer and kellogs
from the above are commercials account for most of the trading in
commodity market.
2. Large speculators: a group of investors that pool their money together to reduce risk
And increase gain like mutual funds in stock market, lare speculator have money
managers that make investment decision for the investor as a hole
3. Small investors: individual commodity traders who trade on their own

account or through a commodity broker. Both small and large speculators
are known for their ability to shake up the commodity market
1.10 COMMODITY TRADING SYSTEM.
Commodity trading systems is the special way of trading commodity on a real time
basis this system makes use of internet for setting up of the required communication
network. There are certain rules that are followed while the commodity system
operates. A number of technical indicators are used in commodity trading systems,
stock, moving averages, relative strengths index and the like are the commodity used
indicators in this systems of trading the traders operating in this systems can take the
help of several variables to develop an effective system that ideally suits their
requirements.
1.10(1) Trend-based commodity systems
Trend based commodity trading systems makes use of the benefits derived from the
market trends (upward and downward) . This systems of trading is developed on the
assumption that the price is more likely to follow the market trend rather than going in
the opposite direction. In most of the cases the trend following commodity trading
systems uses the performance of best players in the market to judge the trend of
market
1.10(2) The range based trading system
On the other hand are developed on the assumption that most of the markets do not
follow any specific trend commodities are purchased when the prices move towards
the lower range and sell out when the prices are on the higher side. The range based
commodity trading systems functions well during the periods of low volatility because
market movements are least when volatility is low however efficient money
management is essential for successful commodity trading under the range based
systems
1.11 What Is A Futures Contract?
->A futures contract is an obligation to buy or sell a commodity at some time in the
future, at a price agreed upon today.
->The contracts themselves are interchangeable. They are standardized as to terms

such as the grade of commodity that is acceptable and when and where it can
be delivered.
->The word commodity is defined very broadly to include physical

commodities, financial instruments. Forex and stock indexes.
->The contracts are traded on an organized and regulated futures exchange so that
buyers and sellers can easily find each other.
->The exchange clearinghouse is the counterparty to every trade, which not only
reduces credit risk in futures trading but also makes it easy for position holders
to exit at any time they wish.
Importantly, a futures contract is an obligation (not a right like an option) and that
obligation must be fulfilled. In most cases it's fulfilled by simply making an
offsetting trade that takes you out of your original position (sold if one has bought;
bought if one has sold). But strictly speaking, you can choose to carry the position
all the way to the delivery date, when it's fulfilled either by the exchange of the
physical commodity or by a cash settlement.
1.12 NCDEX- NATIONAL COMMODITY AND DERIVATIVES

EXCHANGE
This unique parentage enables it to offer a bouquet of benefits which are currently in
short supply in the commodity market. NCDEX is a public limited co-operated on
April 23, 03 under the companies act of 1956. NCDEX is a nation level, technology
driven de-mutualized on line commodity exchange with an independent board of
directors and professionals not having any vested interest in commodity markets. It is
committed to provide a world class commodity exchange plat form for market
participants to trade in a wide spectrum derivatives driven by best global practices
professionalism and transparency.
NCDEX is regulated by forward market commission in respect of future trading in

commodities besides, NCDEX is subjected to various laws of the land like companies
act stamp act, contracts act, forward commission act and various other legislations
which impinge on its working.
NCDEX is located in Mumbai and offers facilities to its members in more than 390
enters throughout India. The reach will gradually be expanded to more centers.
NCDEX currently facilitates trade of thirty six commodities cashew, castor seed
chana, chilly, coffee seed, oil cake, crude oil, mustard oil, gold, guar gum guar seeds,
jeera, sacking bags, mild steel ingot, mulberry mustard seed raw jute, pamolein refined
say oil, rubber same seeds, silk-silver, soyabean, sugar, tea turmeric, wheat, yellow
soyabean meal at subsequent phases trading in more commodities would be facilitated
1.13 MULTI-COMMODITY EXCHANGE OF INDIA LIMITED
[MCX]
MCX an independent and de mutualised multi commodity exchange has permanent

recognition from government of India for facilitating online trading clearing and
settlement operations commodity futures market across the country. Key shareholders
of MCX are financial technologies ltd, State Bank of India, NABARD, HDFC bank
of Hyderabad, State bank of Saurashtra, SBI life Insurance Co Ltd, Union Bank of
India, Bank of Baroda, Canara Bank co operation bank.
Head quarters in Mumbai, MCX is led by an expert management team with deep
domain knowledge of the commodity futures markets, through the integration of
dedicated resources and scalalile infrastructure since in caption MXC has recorded
many first to its credit.
Inaugurated in November 03 by Shir Mukesh Ambani chairman and managing

directors Reliance industries ltd, MXC offers futures trading in the following
commodity categories agriculture commodities, billion metals, ferrous and non
ferrous pulses oils and oilseeds energy plantations species and other soft
commodities.MXC has built strategic alliance with some of the largest players in
commodity eco system, namely Bombay billion association Shethai Sanghatam
united planters association of India and India pepper and spice trade association.
Today MCX is offering spectaculars growth opportunities and advantages a large

cross section of the participants including procedure processors trade corporate region
trading enters, imports, exporters, co-operative industry associations among other
MCX being nation wide commodity exchange offering multiple commodities for
penetration and solvent infrastructure is well placed to tap this vast potential.
CI STRUCTURE OF COMMODITY MARKET
MINISTRY OF CONSUMER AFFAIRS
Forward Market commission
COMMONDITY EXCHANGE
Organized commodity market spot
National Exchange Regional Exchange
NCDEX MCX NMCE NBOT 20 OTHER
Regional
Exchange
C2 CLASSIFICATTION OF COMMONDITY MARKET
COMMONDITIES
METALS AGRICULTURE ENERGY SOFT
COFEE
PRECIOUS BASE SOYABEAN CRUDEOI PORKBELLY
METALS METALS WHEAT L ORANGE
PULSES CASOUNE JUICE
PAMOIL
GOLD COPPER ZINC

SILVER STEEL
PLATINUM ALLUMINIUM
NIKKEL
1.14 GOLD
Gold is a dense, lustrous, yellow metal. Gold is an inactive substance and is

unaffected by air, heat, moisture and most solvents. Gold has been coveted for
centuries because it is rare, beautiful and virtually indestructible.
The prices of gold and paper currencies floated freely according to supply and
demand factors in their own markets. The United States and other central banks hold
physical gold reserves only as a psychological backing for their paper currencies.
World central banks hold a little over one billion troy ounces of gold, which equates to
roughly US$ 550 billion worth of gold [assuming a gold price of US$ 550 per ounce].
The United States holds the highest gold reserves, followed by Germany and France.
Yet, it is just a fraction of the total US debt or the amount of outstanding US currency
illustrating that gold now plays an significant role in backing the dollar or paper
currencies.
Gold's role as an official monetary asset diminished progressively and central banks
continue to reduce their reserves of the metal through outright sales and active lending
programmes. As ownership of the growing stock of gold shifted from the official
sector to the private sector, the gold market became truly global, with the strongest
growth in demand in recent times coming from the Far East, Indian Subcontinent and
the middle east. The shift became pronounced by the sale of gold in the late 1970s by
the United States and International Monetary Fund [IMF], who sold 530 mt and
1555mt respectively, in an attempt to demonetize gold. Outright gold sales are not the
only way that governments mobilize their physical gold reserves; in the past couple of
decades, a growing market has developed that enables central banks to lend, swap, and
transact options contracts on their gold holdings as well.
The mechanics of the lending market are relatively straightforward. Central banks
[and other owners of physical gold] are able to earn a small return on their gold
inventory by lending the gold to the market. The gold bullion banks serve as
intermediary in the transaction- paying the central bank the market lease rate,
typically 1% or so. The gold loans provide substantial liquidity to the gold market,
enabling producers to hedge their forward production and / or speculators to sell gold
short and earn the contango. Gold loans have the effect of accelerating gold supply to
the market, as the lent gold is sold immediately into the market and absorbed by
physical demand. Both producer hedging and speculator short sales were popular bear
market strategies as the gold price tumbled through much of the 1990 but have
diminished in the light of more recent gold price strength.
Gold, the best performing metal, may appreciate for an eight year as investors seek a
refuge from declining interest rates at the same time that central banks inject more
cash into the banking system. Average gold prices have risen for seven consecutive
years, the longest winning streak since at least 1949
1.15 WHY GOLD?
Gold has attracted investors throughout the centuries protecting their wealth and
providing a safe heaven in troubled or uncertain times. This appeal remains
compelling for modern investors, although there are also a number of other reasons
that underpin the widespread renewal of investor's interest in gold. Gold is among a
handful of financial assets that do not rely on a promise to pay, offering refuge from
default risk. It provides insurance against extreme movements that often occur in the
value of traditional asset classes in unsettled times. Portfolios containing gold are
generally more robust and less volatile that those that do not.
Gold is considered a preserver of value, making it a good hedge during inflation.

Gold is a unique commodity- while it is part of the basket of commodities and
broadly moves in line with commodity prices, in periods of uncertainty, it can move
in the opposite direction or have a lower impact. Gold is also a depleting commodity,
which will continue to thrust the prices higher in the long term. A significant part of
the gold comes from sales and disposals. While volatility in currencies/ financial
markets, central banks could end up increasing the composition of gold in their
reserves. This is likely to create additional demand for the commodity, thereby
pushing the prices further up.
1.16 INDIAN GOLD MARKET
Gold is valued in India as a saving and investment vehicle and is the second preferred
investment after the deposits. India is the world's largest consumer of gold in
jewellery as investment. In July 1997 the RBI authorizes the commercial banks to
import gold for sale or loan to jewelers and exporters. At present, 13 banks are active
in the import of gold. This reduced the disparity between international and domestic
prices of gold. The gold hoarding tendency is well ingrained in Indian society.
Domestic consumption is dictated by monsoon, harvest and marriage season. In the
cities gold is facing competition from the stock market and a wide range of consumer
goods.
1.16(1) Government Policy.

Forward trading in gold was banned in 1962, the year of India's armed conflict with
China. The Gold Control Act, 1968 laid down rigid controls on ownership, trading,
import, jewellery manufacture, investment, etc. The Act was repealed in 1990
following the liberalization process and import of gold through nominated agencies
for sale to specified categories and domestic consumers was allowed. At present, apart
from a few public sector enterprises like the STC, MMTC, the banks are permitted to
import gold under OGL. As a consequence, the difference between the international
and domestic prices of gold has reduced. The new policy aims to promote exports of
gold jewellery, recycling of available stocks to reduce import and development of the
gold market. April 2000, saw the voluntary hallmarking of gold and trading in bullion
futures was permitted in 2003. The assaying and hallmarking of gold has been
instituted to lend an edge to the competitiveness of the gold jewellery exports as well
as to provide consumer protection. Several other measures taken to develop the
market include the gold deposit scheme, gold certificates, gold accumulation plans,
and other methods
1.17 DEMAND FOR GOLD
1.17(1) Jewellery demand

Jewellery consistently accounts for around % of gold demand. In December 2007, this
amounted to US$54 billion, making jewellery one of the world's largest categories of
consumer goods. In terms of retail value, USA is the largest market for gold
jewellery, whereas India is the largest consumer in volume terms accounting for 25%
of demand in 2007.
Generally, jewellery demand is driven by a combination of affordability and

desirability of consumers, and tends to rise during periods of price stability or
gradually rising prices and decline in periods of price Volatility.
1.17(2) Investment demand

Because a significant portion of investment demand is transacted in the over the
counter market it is not easily measurable. However, there is no doubt that identifiable
investment demand in gold has increased considerably in recent years. Since 2003
investment has representing the strongest source of growth in demand, with an
increase in value terms to the end 2007 of around 280%. Investment attracted net
inflow of approximately $15 billion in 2007.
Gold investment can take many forms, and some investors may choose to combine
two or more of these for flexibility. The distinction between physical gold and gaining
exposure to movements in the gold price is not always clear, especially since it has
always been possible to invest in bullion without actually taking physical delivery.
1.17(3)Industrial demand
Industrial and dental uses account for around 13% of gold demand [an annual average
425 ton from 2003 to 2007 inclusive]. Recent research has uncovered a number of new
practical uses for gold, including its use as a catalyst in fuel cells, chemical
proceesing and controlling pollution. The potential to use nano particles of gold in
advanced electronics, glazing coating and cancer treatment are all exciting areas of
scientific research.
There is an increasingly wide range of methods available to investors wanting to buy

gold, or gain exposure of gold price movements. If one intends to hold gold in
physical form, it is best to consider holding it in the form of coins, biscuits, etc. and
not in the form of jewels. The methods are ;
1.18(1). Exchange traded funds.
Gold ETFs are open-ended mutual fund schemes that invest in standard gold bullion
[0.995 purity]. The investment will be listed on a stock exchange. They can be
brought and sold on a real time basis, based on price movement of gold. From gold
coins to complex structured financial products, the most appropriate way will depend
on the requirements and outlook of the individual investor. In ETF gold is traded in
the form of securities
a. Gold futures
Gold futures contract are firm commitment to make or take delivery of a specified
quantity and purity of gold on a prescribed date at an agreed price. The initial margin
or cash deposit paid to the broker- is only a fraction of the price of underlying the
contract. That mean investor can achieve notional ownership of a value of gold
considerably greater than their initial cash outlay. Future prices are determined by the
markets perception of what the carrying cost - including the interest cost of borrowing
gold plus insurance and shortage charges ought to be at any one time. The future
prices are usually higher than spot price of the gold.
b. Gold options
These gives the holder the right, but not the obligation to buy or sell a specified
quantity of gold at a predetermined price at an agreed date. The cost of such an option
depends on the current spot price of gold, the level of pre agreed price [strike price],
interest rate, the anticipated volatility of the gold price and the period remaining until
the agreed date. The higher the strike price, the less expensive a call option and the
more expensive is the put option. Like future contract, buying gold option can give
the holder substantial leverage. Where the strike price is not achieved, there is no point
in excercising the option and the holder's loss is limited to the premium initially paid
for the option. Gold options are traded through brokers.
c. Warrants
The leading investment banks give the buyer the right to buy gold at a specific price
on a specific day in the future. For this right, the buyer pays the premium. Like future,
warrants are generally leveraged to the price of the underlying asset [gold], but
gearing can be on one for one basis.
1.18(2). COINS AND SMALL BARS
a) Bullion coins
These coins are legal tender in their country of issue of their face value, rather than for
their gold content. For investment purpose, the market value of bullion coins is
determined by the value of their fine gold content, plus a premium or a mark up that
varies between coins and dealers. Bullion coins range in size from 1/20 ounce to
1000 grams. Although the most common weight [in troy ounces of fine gold content]
are 1/20, 1/10, %, 1A and 1 ounce.
b) Small gold bars
Small gold bars can be brought in a variety of weights and size, ranging from as little
as one gram to 400 troy ounces. Small bars are defined as those weighing lOOOgm or
less.
1.18(3). GOLD ACCOUNT

a. Allocated account
The gold is stored in a vault owned and managed by a recognized bullion dealer or
depository. Specific bars [or coins], which are numbered and identified by hallmark,
weight and fineness, are allocated to each particular investor, who pays the custodian
for storage and insurance. The holder of gold in allocated account has full ownership
of gold in the allocated account, and the bullion dealer or depository that owns the
vault where the gold is stored may not trade, lease or lend the bars except on the
specific instruction of the account holder.
b. Unallocated account
Investors do not have specific bars allotted to them [unless they take delivery of their
gold, which they can usually do within two working days]. Traditionally, one
advantage of unallocated account has been the lack of any storage and insurance
charges, because the bank reserves the right to lease the gold account. Now, that the
gold lease rate is negative in real terms, some banks have begun to introduce charges
even on unallocated account, investors are exposed to the credit worthiness of the
bank or dealers providing the service in the same way as they would be with any other
kind of account. As a general rule, bullion bank do not deal in quantities under 1000
ounces, their customers are institutional investor, private bank, acting on behalf of
their clients, central bank and gold market participants wishing to buy or borrow large
quantities of gold.
c. Gold pool account

There are alternatives for investors wishing to open account holding less than 1000
ounces. For instance gold pool account-where you have a defined unsegmented interest
in gold account. You can invest as little as one ounce.
d. Electronic currencies
There are also electronic currencies available, linked to gold bullion in allocated
storage-, which offer a simple and cost effective way of buying and selling gold, and
using it as money. Any amount of gold can be purchased and there currencies allow
gold to be used to send online payments worldwide.
e. Gold Accumulation Plan

Gold accumulation plans are similar to conventional savings plan in that they are
based on the principle of putting aside a fixed sum of money every month. What
makes this plan different from ordinary savings plan is that the fixed sum is invested
in gold. A fixed sum of money is withdrawn automatically from an investor's bank
account every month and is used to buy gold every trading day in that month. The
fixed monthly sums can be small, and purchases are not subject to the premium
normally charged on small bars or coins. Because small amount of gold are brought
over a period of time, there is less risk of investing a large sum of money at the
wrong time. At any time during the contract term [minimum one year], or when the
account is closed, investors can get their gold in the form of bullion bars or coins or
jewellery. They can also sell their gold and convert into cash.
1.18(4). GOLD CERTIFICATE
Gold certificate offer investor a method of holding gold without taking physical
delivery. Individual banks, particularly in countries like Germany and Switzerland,
issue it; they confirm an individual ownership while the bank holds the metal on
client's behalf. The client thus saves on storage, and personal security, issues and
gains liquidity in terms of being able to sell portions of the holding by simply
telephoning the custodian
1.1(5). GOLD ORIENTED FUNDS

A number of collective investment vehicles specialize in investing in the shares of
gold mining companies. The term collective investment vehicle as used here should be
taken to include mutual funds, open ended investment, companies, closed end funds,
unit trust, and any similar structure. These funds are regulated financial products.
Funds are likely to differ in their structure. It would be misleading to equate
investment in a gold mining equity with direct investment in gold bullion, as there are
some significant difference. The appreciation potential of a gold mining company
share depends on market expectations of the future price of gold, the cost of mining
it, the likelihood of additional gold discoveries and several other factors. Therefore
the success of the investment depends on the future earning and growth potential of
the company.
1.18(6). STRUCTURED PRODUCTS
a. Forward
Forward contracts are agreements to exchange an underlying asset. Buy gold at an
agreed price at some future date. A forward contract is negotiated directly between
counter parties.
b. Gold linked bonds and structured notes.
They provide investors combination of exposure to gold price fluctuations, a yield,

principal protection and tends to allocate part of the sum to purchasing put/ call option
[depending on whether the product is designed for gold bulls or bears]. The balance is
invested in traditional fixed income products, such as money market, to generate
yield. They can be structured to provide capital protect and a varying degree of
participation in any price appreciation depending on market conditions and investment
preferences
1.19 PRICE DETERMINATION
Trading takes place round the clock and in many centers around the world. The
London 'fix1 is the reference price on which a large number of gold transactions
around the world are based. The price is set twice daily at 10:30 and 3:00 London time
by matching buy and sell orders from all over the world. Based on the current market
activity, a 'trying' price is used and the demand- supply matching leads to an
equilibrium price at which demand is equal to supply.
Typically, demand goes up significantly a few months ahead of Christmas, Mother's

day, Valentine day, etc. The summer wedding season in March and April, while the
months of November, December, January and February tend to reflect weak demand
and decline in prices.
1.20 MARKET PLAYERS
> Central Bank

Central banks of various countries hold nearly a quarter of the gold above ground
[30,500 tons in 2000] and about 69 countries are active lenders in the gold market.
Central banks of the United States of America, Japan and India do not actively engage
in market lending. The official lending is governed by the Washington Agreement on
Gold [CBGA] announced on 26 September 1999. It came into existence due to
increasing concern that uncoordinated central bank sales of gold was destabilizing the
gold market and driving the gold prices down.
> Producer Hedgers

Gold mines are the major consumers of lent gold. Gold is lent by the central banks to
mines. The mines sell the gold immediately and use the moneys for production. The
mines return the borrowed gold plus accrued interest out of production. Gold
derivatives thus encourage production by reducing the cost of capital for producers.
> Commercial Bullion Banks
Bullion Banks contribute to the market in these ways
o As buyers, sellers, stock holders and distributors in physical gold.

o As providers of credit for consumers, investors and day-to-day
hedging facilities for the producers.
o As intermediaries in the gold lending market. o As creators of
derivative products. o As traders for themselves
> Private Gold Holders
1.21 SILVER
Silver is a white, lustrous metal that conducts heat and electricity better than any other
metal. In ancient times, many silver deposits were on near the earth's surface. It is one
of the first metals known to humans. Silver assumed a key role in the US monetary
system in 1792 when congress based the currency on the silver dollar, but then
discontinued the use of silver in coinage in 1965. Until the nineteenth century, most of
the nations were on a silver standard, i.e. the currency of the country is expressed in
terms of a specified quantity of silver of specified fineness.
Silver is not very chemically active, although tarnishing occurs when sulphur and
sulphides attack silver, forming silver sulphide on the surface of the metal. Because
There are myriad of contemporary uses of silver, including general industrial

applications, photographic applications, and jewellery and silverware. Silver is also an
important industrial catalyst, vital for production of various widely used products
today, including certain types of plastics. New silver oxide batteries have twice the
electrical energy storage density when compared to lead-acid batteries. The healthcare
industry uses silver extensively, for everything from water and air purification to X-
ray applications. Silver brazing alloys are widely used in air-conditioning and
refrigeration equipment. Its optical reflectively is utilized in mirrors and heat
reflective silver is too soft in its pure form, a hardening agent, usually copper, is mixed
into the silver, because it does not discolor the silver. The term 'sterling silver' means
silver that contains at least 92.5% silver to 7.5% copper.
1.22 INDIAN SILVER MARKET
India, the world's largest consumer of gold and silver, has traditionally been
described as a sink for precious metals, 'with a thousand gates for their entry and none
for their exit*. In the virtual absence of domestic production, the gold and silver used
in coinage, in temples, as ornaments by women, and more recently as an investment
option has come from overseas.
Approximately 4000 ton of silver is consumed annually in India, the vast majority of
which is used in the production of ornamental items -jewellery, utensils and gift
articles. Industrial uses play a smaller part, accounting for about 300 tons. In rural
communities, silver, considered a hedge against inflation, also provides an investment
function. Far more affordable than gold, it is purchased by small farmers in the form
of jewellery, while more wealthy farmers prefer bars, generally 15-30 kg in size.
1.23 DEMAND
The demand for silver is built on three main pillars; industrial usage, jewellery and
silverware and photography. Together, these three categories represent more than
95% of the annual silver consumption.
1.23(1) Industrial usage
Silver can be found in many electrical applications, particularly conductors, switches

and contacts. Contacts provide junctions between two conductors that can be
separated and through which a current can flow, and account for the largest proportion
of electrical demand. The main uses of silver in electronics include pastes for silk-
screened circuit paths, multi-layer ceramic capacitors, silvered film in electrically
heated automobile windshields, and in conductive adhesives. The ease of electro-
deposition of silver, mainly from the salts silver cyanide and potassium silver cyanide,
accounts for its widespread use in plating.
The joining of materials through silver blazing or soldering alloys is facilitated by the
metal's fluidity and strength. These alloys are used widely in applications such as
refrigeration equipment, automobiles and aerospace. Miscellaneous industrial uses for
silver include mirrors, batteries, as a catalyst in numerous chemical reactions and as a
bactericide an algaecide.
1.23(2) Jewellery and silverware

Silver possesses working qualities similar to gold, enjoy greater reflectively and can
achieve the most brilliant polish of any metal. Pure silver [0.999 fineness] does not
tarnish easily but to make it durable for jewellery, it is often alloyed with small
quantities of copper. It is also widely used with base metals in gold alloys. Sterling
silver, at a fineness of 0.925, has for long been the standard for silverware. Plated
silverware usually has a coating of 20-30 microns, while jewelry plating is only 3-5
microns. It consumes about 205 million ounce of silver for jewellery and 250 million
ounce of silver in silverware.
1.23(3) Photography
The photographic process is based on the presence of light-sensitive silver-halide
crystals prepared by mixing a solution of soluble silver, usually silver nitrate, with a
soluble alkali metal halide such as sodium chloride. Within this sector, the
radiography market is now the largest end user. Just a little less is consumer demand
with the printed images taking slightly more silver than that used in the films
themselves. The graphic arts account for much of the remaining off-take.
Photographic film manufacturers demand very high quality silver. It consumes about
342 million ounce of silver.
1.24 GOVERNMENT POLICY
It nominated agencies and banks to import silver on consignment basis where the
ownership of the goods remains with the supplier and the importer [consignee] will be
acting as an agent of the supplier. Remittances towards the cost are required to be
made as and when the sales takes place. It provides for import of silver on outright
purchase basis subject to the condition that although the ownership of silver passes on
to the importer at the time of import itself, the price of silver will be fixed later, as
and when the importer sells the silver to the users. RBI announced that seven banks,
which were authorized to import silver for exporters, Special License Holder [SIL]
and returning NRI's could also import gold and silver for sale in domestic market,
without a license or without surrender of SIL. The SIL was withdrawn in 2001. the
government further permitted NRI's to bring 100kg of silver as part of their personal
baggage. The new Exim policy allows units in Special Economic Zones and Export
Oriented units to bring gold, silver and platinum against their export earnings. This is
in addition to several other incentives announced for the germs and jewellery
industry.
1.25 METHODS OF INVESTING IN SILVER
1.25(1) Bars
A traditional way of investing in silver is by buying actual bullion bars. In some
countries like Switzerland bullion bars can be brought or sold over the counter at major
banks. Physical silver, such as bars may be stored in home safe, a safe deposit box at
the bank, or placed in allocated or unallocated storage with a bank or dealer.
1.25(2) Coins
Buying silver coins are another method of physically holding silver. Can be purchased
at premium.
1.25(3) Rounds
Some hard money enthusiast use 0.999 fine silver rounds as a store of value. A cross
between bars and coins, silver are produced by a huge array of mints, generally
contain an ounce os silver in the shape of a coin, but have a status as legal lender.
Round can be ordered with a custom design stamped on the faces or in assorted
batches
1.25(4) Certificates
A certificate of ownership can be held by silver investor instead of storing the actual
silver bullion. Silver certificates allow investors to buy and sell the security without
the difficulties associated with the transfer of actual physical seller
1.25(5) Account
Most Swiss bank offer silver account where silver can be instantly bought and sold
just like any foreign currency. Unlike physical silver, the customers does not own the
actual metal but rather has a claim against the bank for a certain quantity of metal.
Many digital gold currency providers such as e-gold and gold money, offers as an
alternative of gold and work on similar principle. Silver account is backed through
allocated and unallocated silver storage.
1.25(6) Exchange traded funds

It represents a quick and easy way for an investor to gain exposure to the silver price,
without the inconvenience of storing physical bars. Silver ETF's allow individual to
invest in the precious metal without physically purchasing for storing it. Share of ETF
can be purchased in brokerage account and represent a predetermined amount of
silver less custodian expense. As share of ETF are issued or redeemed. Silver is
brought from a trust.
1.25(7) Spread betting

Firm Cantor Index, CMC Market, IG Index all from UK offers the ability to take a bet
on the price of silver through what is known as a spread bet.
1.25(8) Derivatives
Such as silver futures and options, these trade on various exchanges around the world.
It can be used to mitigate the risk of economic loss arising from the changes in the
value of the underlying can be used by investors to increase the profit arising if the
value of the underlying moves in the direction they expect.
1.25(9) Mining companies

These do not represent silver at all but rather are shares in companies that mine silver.
Companies rarely mine silver alone, as normally silver is found within, or alongside,
are containing other metals, such as tin, lead, zinc or copper. The shares are not so a
base metal investment, rather than solely an silver instrument. As with all mining
shares, there are many other factors to take into account when evaluating the share
price, other than simply the cost price. Instead of personally selecting individual
companies, some investors prefer spreading their risk by investing in precious mining
mutual funds.
1.26 SILVER PRICE
The price of silver has been notoriously volatile as it can fluctuate between industrial
and store of value demands. At times, this can cause wide-ranging valuations in the
market, creating volatility. Silver often tracks the gold price due to store of value
demands, although the ratio can vary.
1.27 MARKET INFLUENCING FACTORS
> Price movements of other metals

> Income level of the rural sector of the economy
> Available supply versus fabrication demand
> Fluctuation in deficits and interest rates
> Inflation
1.28 MARKET PLAYERS
> Gold and silversmiths

They are the main participants in bullion trade and the metal is used for
fabrication as well as re-sale to other big centers
> Melters, refiners and assayers

> Producer and industrial consumers (hedgers)
> Commercial bullion banks
They serve as a conduit for physical trade - as buyers, sellers and distributors of the
metals. This involves active quotation of two-way prices. Banks also play the
important role of providers of credit to consumers, investors and hedgers.
> Private holders

They form a crucial segment in countries in India where silver acts as a store of value
for the low and middle-income rural populace.
> Governments
The governments of various countries play an active role in the silver market and
exercise a strong influence on prices. The Chinese, the United States and several
European countries are the most active participants.
CHAPTER 2
RESEARCH DESIGN
2.1 TITLE OF THE PROJECT OR TOPIC UNDER STUDY
Commodity market as an alternative investment avenue with regard to bullion

market (gold and silver).
2.2 STATEMENT OF THE PROBLEM
• Currently commodity market in India is fragmented and isolated . Spot trading

or online trading is taking place mostly in Mandis and organized market. Thus
the market as failed to deliver the basic objective, "price discovery". In the
context of present Indian investors the market is moving at a very faster face
and in turn the investors are not able to grasp much more information
regarding the drastic changes happening in the commodities market. The
Indian investors are not very aware about the various investment option
available in commodities market. Most of the people have an impression that
the commodities market requires very huge investment and huge risk is
involved more than in the stock markets. The investors must be educated
about the role of such commodity market which helps in the development of
the nation and its economic growth. The aim of the study is to know the
realities of the market.
The commodity market has not got too much exposure. The commodity marker
encourages long term investments and is not meant for daily trading. This project aims
of spreading awareness about how the commodity market works and it also shows the
returns it yields at a constant rate and also to have a deeper understanding.
2.3 OBJECTIVE OF THE STUDY
The objective of study is mainly based on "commodity market as an alternative

investment avenue with regard to bullion market (gold, silver)
• To analyze the working of Indian commodity market.

• To study volatility of Indian commodity market.
• To spread awareness among the investors about the commodity
market and its methods of trading.
• To understand the level of awareness.
• To inform the investors about the safety of investments in the
commodity market
• To investigate the impact of commodity market with regard to
investment
• To evaluate the guaranteed returns /investment
• To understand the investment methods and procedure
2.4 SCOPE OF THE STUDY
• This study confines itself to the analyses of Indian commodity market

on the basis of information collected from questionnaires and
comparison of commodity market(gold, silver) for the years.
2.5 SOURCES OF DATA

PRIMARY DATA
• Interaction with investors regarding their awareness about the

commodity market, also includes providing questioners in order to know
the investors knowledge about commodity market and its importance.
SECONDARY DATA
• This data is collected mainly from books, magazines, internet and it also
includes by interacting with various investors who invest in commodity
market.
2.6 LIMITATIONS OF THE STUDY

• Commodity prices are dynamic in nature which is greatly affected by
regional, national or global development
• The change in government policies can change the whole scenario in
which case the study may not be relevant.
• The commodities are globally traded and major event would globally
affect the market and life of the people in general as some
commodities are essential for human existence.
• Since the subject is so vast this is another drawback for the in depth
study of commodity market.
• Due to lack of time a detailed study was not possible
CHAPTER-3
ANALYSIS AND
INTERPRETATION OF
DATA
GOLD AND SILVER
For the purpose of analysis and interpretation we have taken the price rise of the gold
and silver and also we have issued questionnaires to 50 persons. They include
individual investors, stock brokers, and brokerage firms. The data is collected from
the questionnaires answered by them.
We can know the prices of gold and silver for a period of 10 years. Through this data
we analyze the awareness of the investors about the commodity as a whole. The
investors view about investing in commodity market, its risk factors. The investor's
idea of investing in bullion market and the ways they invest.
From this analysis we can know the investors awareness and the reason for which they
choose other markets.
ANALYSIS AND INTERPRETATION
April gold got hit in the financial panic like other commodities, but found support in
late-October at $700 and then chopped higher. On February 20th, prices hit $1,000
per ounce - a fairly rich level. So far, prices are still above the 50-day average
(updated 2-26).
In six short years, the tables have turned dramatically for gold. In 2001, the
production costs of gold were roughly $160 per ounce as prices dipped to
$270. Then in early-2008, production costs rose to $400 to $500 an ounce as prices
briefly hit $1,000. Much of the credit for gold's rise can go to the consolidation that
has taken place in the mining industry. This activity led to more disciplined
production decisions while the U.S. economy and dollar stumbled.
The heaviest burden on gold prices typically comes from central bank sales. In
September of 2004, a new five-year agreement limited sales to 500 tons per year.
However, bank sales did not reach their limit in 2008 and some are guessing that
banks are no longer eager to sell their gold. On April 8, 2008, the International
Monetary Fund let it be known that it may sell 13 million ounces of gold over several
years to raise cash,
On November 20, 2008, the World Gold Council said that world gold demand
was up 18% in the third quarter from a year ago. Pegging production is trickier. On
November 21, 2008, an analyst was quoted by Bloomberg news as saying that world
gold production will be down 3% in 2008 and down 5% in 2009. However, on March
3, 2009, Australia's Bureau of Agricultural and Resource Economics said that they
expect world gold production will be up 3% in 2009. In late-2008, there was talk that
the financial panic led to a shrinking supply of gold coins.
The chart above depicts silver's performance during the first half of 2004. A volume
spike jump-started a major rally during the early part of the year, and another volume
spike in May foretold a major bottom in formation, the major silver price bottom for
the past five years.
The market rallied into mid-2006, when another volume spike came within a few
weeks of a major top
A volume spike was registered very close to the major $21 high in early 2008. This
shows that is an increase in the prices in the year 2008. This is also shows that there
was huge demand for the silver in the commodity.
Bottom line, these spikes appear to occur very close to or coincident with the timing
of a major high or a major low.
Although it's never prudent to rely on just one indicator, this, in my experience, is a
particularly powerful one. The silver market has been in a bull trend for the past five
months, and we would have to conclude at this time that the volume spikes registered
last week are indicative of a major top. I am a longer-term silver bull, but we should
have no bias. it would take a move above the recent high of $14.63 to negate what
these volume spikes are telling us.
I consider a volume spike a day where trading volume runs 50 percent greater than the
30-day average. The 30-day volume average for silver futures is approximately
25,000 contracts. We saw three consecutive days of volume spikes Feb. 24-26, finally
registering volume well more than double the 30-day average. The price dropped
during this volume binge from about $14.50 an. ounce to around. The price of silver
bottomed in October 2008 and by early last week had risen almost 70 percent from
the bottom to the highest levels in the past year.
The price of the gold to be traded in the commodity market is fixed by the London
gold fix. We can find that there is an increase in the gold prices over the last 8 years.
In the year may 2007 to May 2008 we find a decrease in the price of gold. But in the
year may 2008 to march 2009 we can see an increase in the prices. From the graph we
can know that investors can make a high profit if they invest in the gold as the prices
of the gold are going to increase as we see an increasing trend in the graph.
The price of the silver to be traded in the commodity market is fixed by the London
fix.
From the graph we can know that the price of silver has followed a increasing trend
until 2007. From the year 2008 to 2009 we find a decrease in the value of silver. But
the production and supply is not affected at all.
This graph shows the prices of the gold for the past 10 years. The price of the gold has
increased during the years till the mid of March 2006. Later we find a fluctuating
trend from 2006 to 2009. Even though there is a variation in the value of price the
demand of gold has not decreased.
This also indicates that a investor can invest in the gold with amount of risk as the
price of the gold is increasing. The investor can make profit if he stays for a longer
period. The graph also indicates the highest and the lowest price.
The graph shows that there is a fluctuating trend in the price of the silver. From the
year 2000 there is a decrease in the price. In the year 2003-05 there was a increase.
Later in the year 2006 there was a decrease. Then the prices increased at a very high
rate in the year 2007. In the year 2008 there was a huge fall in the prices. In the year
2009 it is recovering the decrease by a slight increase in the prices.
This shows that the prices of the silver are not moving at a constant rate of growth.
The value keeps changing all the way.
3.2 BASED ON QUESTIONNAIRES GIVEN TO
INVESTORS
3.2(1) THE INVESTORS INVEST THE MOST

This data shows, in which market the investors invest. The options given where Stock
market, Commodity market, Derivative market, Forex market.
T2
No of persons In percentage
Stock Market 35 70%
Commodity Market 10 20%
Forex Market 5 10%
Total 50 100%
G l0
ANALYSIS
From the data we can know that the investors are mainly trading in the stock market
than any other market. The commodity market stands second by 20% and Forex by
10%.
INTERPRETATION
The commodity market and the Forex market are showing low response because of
unawareness about the commodity market, the trading methods and techniques etc. In
case of Forex market it is the risk factor and the lack of knowledge to trade in the
International markets. The government, brokerage firms, can educate the investors
about the existence of these markets and the procedure for trading in these markets.
Investors are trading in the stock market because you can trade on a daily basis and
make profit. This cannot be done in commodity market, an investor has to wait till the
prices in the market rise and then sell, so it takes time.
3.2 (2) THE MARKET WHICH MORE RISKY
This graph shows the markets which are risky according to the investors
T3
Commodity Market 0 0
Stock Market 40 80%
Derivative Market 0 0
Forex Market 10 20%
Total 50 100%
G l1
3.2(3) EXISTENCE OF TRADING IN COMMODITIES MARKET BY THE
INVESTORS.
This data shows from how many months or years they are into commodities trading.
Through this data we can know about the percentage of commodity market investors
and the knowledge of the investors about the existence of the market.
T4
No of persons In percentages
Just started trading 38 76%

6 months 10 20%
A year 2 4%
More than year Nil Nil
Total 50 100%
ANALYSIS
This data shows that most of the investors came to know about commodity market
and it's trading in recent times. It shows a very high response of 76% who have just
started which means that a few are aware of the commodity market.
INTERPRETATION
From this graph we can know that the investors are educated about the commodity
market and they have started to invest in these markets in recent times. But when we
see about 6 months and 1 year trading we don't find a high percentage which was due
to lack of knowledge and awareness among the investors.
(4) GROWTH OF COMMONDITY MARKET IN THE COMONG YEARS
T5
YES 45 90%
NO 5 10%
Total 50 100%
G13
ANALYSIS
From this graph we can know that majority of the investors said that the commodity
market will improve over the years i.e. 90%. But the rest 10% say that there is no
chance of growth and performance which may be due to less investor in the
commodity market
INTERPRETATION
This shows that the investors are sure that over the years to come commodity market
will improve and we can find many investors who will invest in this market in the
coming years. If the government conducts an awareness programme to make aware of
the market, then we can find many investors who invest in the market which later
results in growth of the commodity market. But the rest 10% say that there is no
possible growth because it is not traded on a daily basis and you have to wait for
some for the prices to rise. And also the number of investors is less when compared
with the stock markets.
3.2 (5) THE RATING OF THE COMMONDITY MARKET WHEN
COMPARED WITH STOCK MARKET AS GIVEN BY THE INVESTORS.
T6
Poor 2 4%
Average 39 78%
Good 7 14%
Very good 2 4%
Total 50 100%
G 14
ANALYSIS
From the graph we can see that about 78% of the investors have said ratings as average
when compared to stock market. Only 14% has said it performs well, this may be
because they are earning the profit in the commodity market. About 5% said it has
poor performance and 5% said they are performing very well.
INTERPRETATION
From the analysis we can know that there are investors who invest in both commodity
and stock market. As they know the performance of these markets, its risk factor,
profit earning capacity etc. it also shows that the percentage of investors or the
people's awareness about commodity and stock market such that they compared the
factors of both the markets.
3.2 (6) FREQUENTLY OF TRADING IN COMMONDITY MARKET
This data shows how frequently an investor trades in the commodity

market. The options here are weekly, monthly, quarterly
T7
Weekly 38 76%
Monthly 7 14%
Quarterly 10 10%
Total 50 100%
G 15
ANALYSIS
76% of the investors said that they trade on a weekly basis. 14% of the investors said
that they trade on a monthly basis. 10% of the investors said that they trade on a
quarterly basis.
INTERPRETATION
From the graph we can know that the investors are always looking into profit
maximization as they are staying in the market for a long time. When compared with
the stock market the time period is quite high as there we can make profit in a day and
come out. But in case of commodity market an investor has to stay in long run in
order to maximize his profits. In case of commodity market also we can find that the
investors are very eager to make profit in a week's time as 76% of the investor's trade
weekly.
(7) THE RETURN ON INVESTMENT WHEN COMPARED WITH OTHER
MARKETS
In this graph we can find out the investors opinion about the return on investment they
make in the commodity market when compared with the other markets.
T8
YES 12 24%
NO 38 76%
Total 50 100%
G 16
ANALYSIS
From the data we can know that the investors are not satisfied with the return on
investment as 76% of them have said they are not satisfied with the return. While only
24% are satisfied with the return.
INTERPRETATION
From the graph we find that majority of the investors are not satisfied with the return
they receive. This may result in the down fall of the commodity market. If the interest
received is less the investors tend to invest their money in any other markets. The
commodity brokerage can ensure that their customers get the maximum return such
that they will sustain in the market. And to ensure that the commodity market will
grow in the coming years if there are more investors and trade happening in the
market.
3.2 (8) IS COMMONDITY MARKET MEANT FOR DAILY TRADING
T9
YES 2 4%
NO 48 96%
Total 50 100%
G 17
ANALYSIS
From the graph we can know that the majority of investors say that
commodity market is not meant for daily trading. Only 4% of the investors say that
they can trade on daily basis.
INTERPRETATION
From the data we can know that commodity market is not meant for daily trading. If
an investor has to make maximum profit one has to invest for a long period and look
into the market price of commodities. Hence there are less number of investors due to
less knowledge of the market and also due period of the investment.
3.2 (9) THE COMMONDITIES THE INVESTORS TRADE THE MOST
T 10
Precious metals 30 60%

Agriculture 20 40%
Energy Nil Nil
Soft Nil Nil
Total 50 100%
G 18
ANALYSIS
From the above graph we can know that about 60% of the investors invest in precious
metals like gold, silver, platinum etc. And about 4% invest in agriculture products like
wheat, pulses etc.
INTERPRETATION
We can know that investors are interested to invest in metals and agriculture as they
tend to vary in the market in a periods time and also easy to trade. The investors are
not interested to invest in energy and soft like coffee and juices. As there is high risk
and it is difficult to trade.
3.2 (10) THE EXCHANGE TRHOUGH WHICH THEY TRADE
T 11
NCDEX 37 74
MCX 13 20
NYMEX Nil Nil
LME Nil Nil
Total 50 100%
G 19
ANALYSIS
The graph clearly shows that the investors trade mainly through these exchanges
in the commodities market. 76% of investors trade through NCDEX and the rest
through MCX.
INTERPRETATION
The graph clearly states that the investors are mainly investing in the agriculture and
precious metals. The brokers of the other two exchanges must try to convince the
investors about the profit making level in these products and try to bring more
number of investor's participation such that they trade through these exchanges.
3.2 (11) THE TRADING IN BULLION MARKET
T 12
YES 30 60%
NO 20 40%
Total 50 100%
G 20
ANALYSIS
There are 60% of investors who invest in gold, silver and platinum. But still the rest
are trading in the other areas of trading.
INTERPRETATION
There are more investors who invest in the precious metal than any other market. It is
because the prices in the market keep changing according to the international changes.
The profit earned from these markets is high compared to other markets. The
investment made in silver and gold can be considered as investment or an ornament.
When we sell these after many years even at that time you can make double the profit
as earlier
3.2 (!@) THE TRADING SYSTEM INVESTORS FOLLOW
T 13
Trend 15 30%
Range 35 70%
Total 50 100%
G 21
ANALYSIS
The graph shows that 70% of the investors follow range based commodity system
than trend based commodity system.
INTERPRETATION
The investors range based trading because they buy the commodities when the
prices are low and sell out when the prices are high. Under trend based system it
makes use of the benefits derived from the market trend. This is based on the
assumption that the price is more likely to follow the market rather than going ion
the opposite direction. It considers the performance of best players in the market to
judge the trend of the market.
It is better to follow range based trading as it is more effective.

3.2 (13) PROTECTION AGAIST PRICE VOLATALITY IN THE COMMONDITY
MARKET
T 14
Speculating risk 15 30
Quota system Nil Nil
Price hedging on future 10 20
markets
Foreseeing demand and act 25 50
accordingly
Total 50 100%
G 22
ANALYSIS
The graph shows that about 30% say that they follow speculating risk, 20% price
hedging and 50% foreseeing demand.
INTERPRETATION
The investors are very careful while investing. As they choose the best protective
way while trading in the market, it is better to fore the demand of the product and
then trade. For example if it is the season of marriages the price of gold will be high
and at that time you can sell your gold at a higher rate.
The investors must follow be very careful in protecting the investment. Therefore
they must safeguard the investment by following a safer method.
3.2 (14) THE PERIOD ON INVESTMENT FOR HIGH RETURNS
T 15
6 months
1 year 6 12
1-2 year 6 12
2 or more 38 76
Total 50 100%
G 23
ANALYSIS
The majority of the investors say that if one has to make profit he has to stay for a
period of more than 2 years. I he has to make a immediate minimum profit he can go
for investing in 1 or 2 years.
INTERPRETATION
If the investors invest for a period of more than 2 years he can make o maximum
profit. Because the prices of gold and silver are tend to increase over a period of time
when we look into the price variation graphs of gold and silver. In a single year if
there is a fall in the prices it takes time to recover the loss and gain the previous
position. Therefore it is better to invest for a longer period. If a person wants to
immediately get out of the market with a less percentage of profit he can invest for 1
or 2 years.
3.2 (15) TRADE THROUGH OWN ACCOUNT
T16
YES 2 4%
NO 48 96%
Total 50 100%
G 24
ANALYSIS
As in the graph 4% trade through their own account. Rest of them trade through
their broker's account.
INTERPRETATION
The data says that most of the investors trade through their broker's account which is
safe as risk free. If they want to sell or purchase a commodity they can inform the
broker can say him what to do, and at what level of price he can buy or sell the
commodity in the market such that he gets the desired profit from investment.
CHAPTER 4
SUMMARY OF
FINDINGS
SUMMARY OF FINDINGS
• Commodity market is a long term investment tool and if held on to for a small
period of time might not yield the same return as it would after a few years.
• Commodity markets are a important constituent of the financial
• market where a wide range of products are traded.
• The commodity market is more predictable market when compared to stock
market. The seasons for commodities like agricultural products are known and
investors can trade accordingly.
• The stock market is very interdependent if the stock of even one player in
the market crash the whole market crashes. This is not the case with company,
they are independent in nature and do not depend on such factor.
• The amounts of investments in commodity is pretty high but if it held for a
considerable period of time the yield are quite high.
• The investors are not educated about the commodity market. As a result the
investment made in commodities market is less when compared with stock
market.
• There are different methods of holding gold and silver in both physical
and non physical form. It ensures safety of the commodity without any locker
facilities.
• The trading takes place round the clock and in many centres around the world.
The London 'fix' is the reference price on which a large number of gold and
silver transactions around the world are based.
• The government has taken measures to develop the market by
introducing gold deposit, gold and silver certificates, gold
accumulation plans, silver and gold accounts and various other methods.
• Ultimately, the size of the gold investment market is some proportion of all the
gold that has ever been mined. On this basis, gold represents around 4% of the
market capitalization of global bonds and equities.
• When national currencies are no longer backed by real assets, gold maintains
its value as an independent, international currency but at the same time is used
as a commodity, and certainly viewed as a commodity, by many investors
around the world. Gold's ability to play this dual role successfully underpins its
usefulness to investors.
• Gold and silver is useful because it is valuable, and because of its other
properties. Other commodities are not as useful because they are not as
exchangeable or portable because they weigh too much given a similar value,
such as oil, zinc or copper. Or other commodities are not as useful as a long
term store of value because they spoil, such as food. Or other commodities are
not as useful because they are not fungible, and have a higher price range
between the buy and sell price, such as diamonds.
CHAPTER 5
RECOMMENDATIONS
• Investors are recommended to invest in the commodity market and all
investments made should be with a long term perspective to get good
returns.
• The investors are recommended to diversify their investment

according to portfolio. It helps the investor to maintain less risk and
high returns.
• The brokerage firms, brokers and corporate can educate the investors
and the common people about the commodity Market such that there
is high amount of investment in the market.
• The investors are recommended to stay in the market for a long run
basis such that they get high returns on investments.
• The governments must initiate some programs to educate the investors

and also liberalize the policies.
CONCLUSION
Despite a long history of commodity market the Indian commodity market are
underdeveloped partially due to intermediate ban on commodity trading and more
due to the policy interventions by the government. Being agriculture based
economy commodity market plays a vital role in the economic development of
the country. With the growing government support and rapid growth of financial
market now there are 24 recognized commodity exchanges and association operating
in India which are authorize and regulate future trading in various commodities. A
vibrant and liquid commodity market is very essential for any developing and
developed economy. India is our country where a major part of the population
depends on agriculture and allied activity for its survival. With rising economy and
increasing integration with global economy. India needs a well developed liquid
commodity market. Therefore the commodity market plays a very important role in a
country's development and the Indians should be made aware of the opportunities and
benefits from investing in this market
BIBLIOGRAPHY
The project is done from various books, with help of stock brokers and from various
websites. These are the source of our project.
websites
• www.gold.org
• www.silver.
• www.wikipedia.com
• www.barcharts.com
• www.investindia.com
• www.silverinvesyment.com
• 3 .bp.blogspot.com
• Charts3 .barchart.com
• www.kitcosilver.com
• www.commodity.com
• www.dani2989.com
References
• Commodity and Derivatives Market.

ANNEXURES
QUESTIONAIRE
Sir/Madam,
We are in need of the information as a part of completion of our research project. This
project is a part of our curriculum. We seek only your general views about the topic
commodity market and its realities and the ways it has helped in giving you a better
return it yields at a constant rate. I thank you for your co-operation and also assure you
complete confidentiality of the information you will so sincerely and patiently share with
us.
Name of organization:_______
Name of the person:________________________Designation:
1. In which market do you invest in regularly?
Stock market
Commodity market
Derivative market
FOREX market
2. Which market do you think is more risky and why?

Commodity market
Stock market
Derivative market
FOREX market
Please specify why it is risky_______________________
3. From how many years have you been trading in commodity market ever since its
existence from 2004?
just started trading
6 months
A year
More than a year (pis do specify how much_______________)
4. Do you think commodity market will improve in future in terms of (Growth and
Performance).
Yes
No
5. How well do you rate commodity market from comparing stock market with the scale
of 1 to 5 in terms of its growth?
1 - very poor
2- Poor
3 - Average
4- Good
5- Very good
Please specify the reason for the rate given______________________________________
6. How often do you trade in commodity market?

Weekly
Monthly
Quarterly
Others pis specify
________________________________
7. Does commodity market ensure you more return on investment compared to other
markets?
Yes
No
8. Do you believe that commodity market is not meant for daily trading and why?
Yes
No
Please specify why____________________________
9. In which commodity do you trade on?
Precious metals [Gold, Silver... ]
Agriculture [Wheat, Pulses...] D
Energy [Crude oil, Gas...]
Soft [Coffee, Orange juice ...]
10. Through which exchange do you trade your commodities?

NCDEX
MCX
NYMEX
LME
Others pis specify___________________________________
11. Have you traded in Bullion market (Gold, Silver)?

Yes
No
12. Do you trade directly through your own account or through a commodity broker?
Yes
No
13. Which type of trading system do you follow while investing in commodity market?
Trend based commodity system
Range based commodity trading system
14. How do you protect against price volatility in commodity market is it through
Speculating Risk
Quota system
Price hedging on future markets
Compensatory fund
Foreseeing demand and acting accordingly
Others pis specify_______________________________________________
15. How long do you think that one must invest in commodities to get better returns?
6 months
1 year
1 -2 years
2 or more
Thank you so much for your valuable time and pis mention any additional comments and
suggestions if any towards the above research
Best Regards,
Akshat Bijlani
BBA (Finance)
Christ University Bangalore -560029

My Proj

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

My Proj

Enviado por

Direitos autorais:

Formatos disponíveis

A DETAILED STUDY ON COMMODITY MARKET AS AN

ALTERNATIVE INVESTMENT AVENUE WITH REGARD TO

Submitted in Partial fulfillment of the requirement for the award of the

Under the guidance of

Department of Management Studies

I declare that this project titled, “A DETAILED STUDY ON

This is to certify that “ Akshat Bijlani, Register No. 08D1611” is a bonafide

He has prepared and submitted a project report titled “A DETAILED STUDY

Place: Bangalore Dr. Jain Mathew

This is to certify that this project report titled “A DETAILED STUDY ON

CHAPTER NO CHAPTER NAME PAGE NO

1.1 INTRODUCTION TO COMMODITY

1.1(1) COMMODITY MARKET

1.2 HISTORY OF COMMODITY MARKET

1.2(1) INTRODUCTION OF COMMODITY MARKET

1.3 EVOLUTION OF COMMODITY MARKET IN

1.4 GROWTH OF COMMODITY MARKET

1.5 ROLE OF COMMODITY MARKET

1.6 HOW TO START TRADING IN COMMODITY

1.7 HOW ARE COMMODITIES TRADED

1.7(1) FUNDAMENTAL ANALYSIS

1.7(2) TECHNICAL ANALYSIS

COMMODITY TRADING SYSTEM

1.17(3) INDUSTRIAL DEMAND

1.18 METHODS OF INVESTING IN GOLD

1.18(1) EXCHANGE TRADED FUNDS

1.18(2) COINS AND SMALL BARS

1.18(3) GOLD ACCOUNT

1.18(4) GOLD CERTIFICATES

1.18(5) GOLD ORIENTED FUNDS

1.18(6) STRUCTURED PRODUCTS

1.19 PRICE DETERMINATION

1.20 MARKET PLAYERS

1.22 INDIAN SILVER MARKET

1.23(1) INDUSTRIAL DEMAND

1.24 GOVERNMENT POLICY

1.25 METHODS OF INVESTING IN GOLD

1.25(6) EXCHANGE TRADED FUNDS

1.25(7) SPREAD BETTING

1.25(9) MINING COMPANIES

1.26 SILVER PRICE

1.27 MARKET INFLUENCING FACTORS

1.28 MARKET PLAYERS

2.1 TITLE OF THE PROJECT

2.2 STATEMENT 0 THE PROBLEM

2.3 OBJECTIVES OF THE STUDY

2.4 SCOPE OF THE STUDY

2.5 DATA COLLECTION METHODS

3 ANALYSIS AND INTERPRETATION OF DATA GOLD

3.1(2) SILVER 2004

3.1(3) SILVER 2006

3.1(5) SILVER 2009

3.1(6) 10 YEAR GRAPH OF GOLD PRICE FIXATION

3.1(7) 10 YEAR GRAPH OF SILVER FIXATION

3.1(8) PRICE OF GOLD OF PAST 10 YEARS

3.1(9) PRICE OF SILVER OF PAST 10 YEARS

3.2 BASED ON QUESTIONNAIRES GIVEN TO

3.2(1) THE INVESTORS INVEST THE MOST

3.2(2) THE MARKET WHICH IS MORE RISKY

3.2(3) EXISTANCE OF TRADING IN COMMODITY

3.2(4) GROWTH OF COMMODITY MARKET IN

3.2(5) THE RATING OF COMMODITY MARKET WHEN