GOLD GUINEA

Gold Guinea is a historically significant coin minted in the United Kingdom between 1663 and 1813. Originally valued at one English Pound sterling, these coins typically weighed around 8.3-8.4 grams. The name “Guinea” is derived from the region in Africa where much of the gold used to produce these coins originated.

In the Indian context, Gold Guinea refers to 8 gram gold coins with a purity of at least 0.995. These coins are primarily used for retail investment purposes. The demand for gold coins for retail investment in India is estimated to be around 35 tonnes, with expectations for significant growth in the coming years.

Major Characteristics:

• Gold serves as both a commodity and a monetary asset.
• Its stability and enduring value make it virtually indestructible and highly recyclable.
• Gold experiences ownership shifts rather than true consumption, maintaining a relatively constant stock.
• Recycled gold, along with mine production, helps stabilize gold prices.
• Economic forces influencing gold prices differ from those affecting most financial assets.

Global Supply-Demand Scenario:

• The total above-ground gold stocks are estimated at around 163,000 tonnes, with various allocations for jewelry, official reserves, investment, industrial use, and unaccounted categories.
• Jewelry accounts for the majority of annual gold demand, followed by investment and industry.
• The total annual global gold demand has averaged 3,530 tonnes in recent years, with expectations of a slight dip in 2009 due to price increases.
• Major gold-consuming countries include India, China, the USA, Turkey, Saudi Arabia, and the UAE.
• Global mine production, along with recycling and official sector sales, provides stable supplies.
• South Africa has historically been a significant gold producer, but its output has declined in recent years. China emerged as the world’s largest gold producer in 2007.
• Gold markets are active in various locations, including London, New York, Zurich, Tokyo, Mumbai, Istanbul, Dubai, Hong Kong, and Singapore.

Indian Gold Market:

• India is the world’s largest consumer of gold, accounting for about 25% of global consumption.
• Demand in India has been impacted by price increases, with expectations of a further decline in 2009.
• India heavily relies on imports to meet its gold demand, with minimal domestic production.
• Gold is deeply ingrained in Indian cultural and religious traditions, valued as a savings and investment vehicle.
• Seasonal factors, such as monsoon and marriage seasons, influence domestic consumption.
• The RBI’s authorization for commercial banks to import gold has helped reduce price disparities between international and domestic markets.

INDIA IN WORLD GOLD INDUSTRY

Market Moving Factors:

• Indian gold prices are closely correlated with international prices, with fluctuations in the INR-US Dollar exchange rate also impacting domestic prices.
• Global gold prices are influenced by macroeconomic factors, supply-demand dynamics, currency movements, interest rates, and shifts in official gold reserves.
• Investment in gold is affected by comparative returns from other markets, such as stocks, real estate, and commodities.
• Domestic demand and prices are influenced by seasonal factors like marriages and the rural economy’s health.

WEIGHT CONVERSION TABLE

PURITY

• Gold purity is measured in terms of karats and fineness
• Karat: Pure gold is defined as 24 karat
• Fineness: Parts per thousand
• Thus, 18 karat = (18/24)th of 1000 parts = 750 fineness