INVESTING IN PRECIOUS METALS:

AN INTRODUCTION TO THE GOLD

BULLION MARKETS.
CONTENTS
• Introduction to bullion
• Properties of gold.
• Summary of bullion in 2021 and 2022
• Supply and demand of gold in 2021 and 2022
• Mining supply and Mining companies
• Process involved in making gold bars
• Jewelry fabrication
• Recycling and how it affects the spot price of gold
• Industrial fabrication
• India International bullion exchange meaning and operations
• Official sector
• Gold as an investment
Introduction to bullion.

• Type of commodity that consists of gold, silver and

other precious metals.

• Most commonly exchanged means are in the form

of bars or coins

• Determined by factors like purity, weight and

underlying market forces.

• Usually measure in troy ounces, i.e., 31grams

Properties of Gold…..1

• Precious metal valued for its beauty, ductility

malleability electrical and thermal conductivity.

• Chemically stable, i.e., does not tarnish or

corrode easily

• Density of 19.3g/cm3, melting point of 1064

degree Celsius and starts boiling around
2000degree
 Properties of Gold…..2
• Some fun facts about gold include is that it is so
ductile that only 1gram of can be drawn into a
2km long wire with the thickness just being
0.00028722cm

• And gold is so malleable that 1gram of gold can

be made into a sheet of one square meter with
the thickness being 5.1micro cm.

• Commonly alloyed with silver to make jewelry

and also used in dentistry, electronics and
industrial fabrication.
 Summary of bullion in 2021 and 2022.
• In 2021 we saw an increase in demand due to:-
• Geo-political tensions (Russia-Ukraine war)
• Weakening of the USD
• Record low interest rates
• Gold prices risen to an all-time high $2000troy ounce.

• In 2022, The gold market was quite robust and volatile due
to :-
• Increased interest rates
• Monetary policies
• And increased demand from China Turkey and India
Supply and demand of gold in 2021
• Global demand of gold remained strong
throughout 2021 due to
• Uncertainty of economy and increasing rate of
inflation
• Mainly driven by central banks, institutional and
retail investors

• Global supply started to pick up as the covid

restrictions were limited thus helping in mining
and other supply related activities
Supply and demand of gold in 2022
• Gold was heavily influenced by:-
• Global events
• Market instability
• Recessions
• Currency fluctuations

• The supply of gold bullion is subject to shifts in

• Mining production,
• Central bank sales and
• ETF holdings. Therefore it was a little more complicated
to predict the supply and demand for gold in the year
2022.
Mining supplies and methods
• Mining supplies include the tools used for mining purposes which can
range from simple axes to large excavators.

• Gold mining is the process of extracting gold from the earth’s surface
or from deep underground deposits.

• The method of extraction depends on the particular deposit,

composition of the ore and the surrounding environment near the
mine site.

• The most common methods of mining are:-

• hydraulic mining,
• Open-pit mining,
• Dredging, and
• Underground mining.
Mining Companies

• Newmont Corporation-
• American gold mining company
• ESG rating 4.7/5
• Widely known as the most responsible miners
• Mining countries are Australia, Peru, Canada and Mexico.
• Uses both underground and open-pit

• Barrick Gold Corporation-

• Canadian gold mining company
• ESG rating 4.5/5
• Mining countries are Argentina, Saudi Arabia, Tanzania and Peru
• Uses both underground and open-pit mining

• Anglo gold Ashanti-

• South African mining company
• ESG rating 4.4/5
• Mining countries are Peru, South Africa, USA
Process involved in making gold bars
Mining the ore

Dissection of the ore

Refinement of the ore

Casting the gold bars

Assessment of the Bars

Storage of Gold Bars

Jewelry fabrication

• Process of crafting jewelry from Gold bars.

• This process involves melting down the gold bar,
• Forming it into the desired shape, and
• Adding details like engravings, stones and other
decorations.

• In 2021 and 2022,

• The jewelry fabrication industry saw a steady
increase in demand due to the growing popularity of
personalized and custom made jewelry sets.
• Additionally with the rise of e-commerce, more
consumers were looking for unique jewelry which
was not available in stores.
Recycling and how it affects the spot price of gold
• Recycling is an important way to conserve
natural resources and reduce environmental
impact.
• Helps in reducing the amount of gold mined,
in turn has a positive impact on price.
• Uses fewer chemicals than mining gold.

• Gold has a finite source, so by recycling

jewelry, people are helping to ensure that
there is a steady supply of gold available for
the future generations.
Industrial fabrication
• Refers to the process of transforming gold bullion into components
used in commercial and industrial applications.
• Includes melting and casting into any shape or form for industrial
use.
• End products can range from jewelry to medical devices.

• Industrial fabrication for 2021 and 2022 remained relatively stable.

• In 2021, the global demand was reported as 4400T

• In 2020, The global demand was slightly higher which was 4605T
• In 2022, the demand picked up with regards to 2021 which was
4530T
 India International bullion exchange meaning and
operations
• India International bullion exchange (IIBX) is an
online platform for trading in gold and other
precious metals.
• It was established in 2016 under the backing of
the multi commodity exchange of India (MCX).
• It offers a range of gold and silver derivatives,
including bullion, coins, bars and e-gold.
• Regulated by SEBI
• Offers various products such as physical gold, gold
ETF’s, gold mutual funds, and other gold-related
investments.
• The fluctuations are based on the spot price of
gold and silver in the international market. It also
acts as a price discovery platform for gold and
silver prices in India
Official sector

• Refers to the government and central banks which

help affect the price of gold.
• Its primary objective is to manage and influence
gold prices, as well as to use gold as a reserve asset.
• Largest holder of gold reserves for the particular
country.

• It is also responsible for setting the “official price”

of gold in the markets.
• Through its activities, the official sector can
influence the supply and demand of gold, which in
turn affects the gold price.
Gold as an investment

• Gold is an investment asset that has been used for

centuries to store wealth and provide financial security.
• It is prized for its scarcity, beauty and durability, and
can also be used as a hedge against inflation and
currency crisis.
• Gold typically moves in the opposite direction of stock
markets and other assets, providing investors an
attractive portfolio diversification option.
• Gold also has a low correlation to other assets,
meaning it can be a valuable tool for risk management.
Why should we invest in Gold?

• In the alongside chart, you can see that Gold has on

average provided annual returns of 9.6% over the past
40 years, and during that period, only 8 instances of
negative annual returns were recorded.

• Apart from the returns offered by Gold, another key

reason for using it as a hedge is based on the fact that it
has historically shown lower volatility than equity
investments over the long term.
Gold Vs Sensex. (1998 to 2020)
• In the above graph, you can see a few key instances when
Gold showed superb performance such as :-
• 1991-1993, 1999-2001, 2007-2010, and 2020.
• In each of these instances, Equity markets had corrected
significantly due to various reasons such as the Indian
Currency Crisis (1991-1993), Dot Com Bubble (1999-2001),
Global Financial Crisis (2007-2010), and COVID-19 Pandemic
(2020).

• Thus, the historical data shows us how gold can act as a

hedge to the equity markets and also as a reserve asset.
Gold Investment Options in India
• To invest in Gold you either opt for the physical
form or the digital form.
• In its physical form, Gold as an investment can be
held in the form of jewelry, coins, bars i.e. bullion,
etc.
• To overcome the limitations of physical gold which
can be theft, purity issues.
• We can also opt for the digital route which
includes investments such as Digital Gold, Gold
ETFs, Gold Mutual Funds, and Sovereign Gold
Bonds.
Key Risks of Investing in Gold

Type of Investment Key Risks

Physical Gold Theft, purity and loss during manufacturing

Digital Gold Lack of regulatory oversight

Gold ETF’s Market risk related to volatility

Gold Mutual funds Market risk related to volatility

Thank you