Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

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PRICING AND PROFITABILITY GOLD BULLION BANK IMPORTERS The Gold Cells of authorised bank importers are obliged to absorb all overheads and the direct costs incurred when buying gold bars (from international suppliers) and selling them (to secondary tier dealers). Overheads include administrative and insurance costs and, in some cases, the cost of consignment stocks that move slowly. To cover these costs, and to generate a profit, a Gold Cell generally relies on 3 - 5 sources of income. Small gross mark-up Banks normally apply a small percentage or rupee amount to the actual cost of the bullion (delivered to a location in India) at the time it is purchased from an international supplier. The actual cost takes into account the US dollar gold price quoted by the international supplier (that supplied the consignment stock), the bar mark-up per ounce charged by the supplier (inclusive of the refiner’s fabrication charge and the cost of insured delivery to the required city in India), the US$/rupee exchange rate, Customs duty, State sales taxes and other taxes. The bank’s gross mark-up on the actual cost of an imported TT bar is currently low, at around 0.1% (Rs 15 per oz - about US$ 0.32), although it can vary according to the size of the transaction and the prevailing level of TT supply and demand. Since the introduction of the OGL Scheme in 1997, the bank’s mark-up on imported TT bars has fallen significantly. In 1997, it was around 0.6% (about Rs 90 per oz - US$ 2). Rupee exchange rates The opportunity to convert US dollars into rupees in-house enables banks to generate a small amount of incremental income. Typically, a few paise per US dollar. Interest earned on advance payments As most secondary tier dealers are obliged to lodge large cash deposits and/or make payment in full before delivery, the bank can earn interest on those funds until obliged to pay international suppliers. Movements in the gold price Although the Gold Cells of most banks are permitted to take some risk on movements in the gold price, almost all do not. On rare occasions, in a rapidly rising gold price scenario and anticipated demand is “guaranteed”, a small risk might be undertaken by some. Gold loans Income is also derived if the bank offers gold loans to jewellery exporters (and, if it is part of the Gold Deposit Scheme, to domestic fabricators and retailers). For example, one bank requires a cash deposit (110%), a bank guarantee (110%) or other securities to 100% value of the gold plus 10% cash, plus an annualised interest payment ranging from 7.5% to 10.5%, plus handling charges. Addendum International refiners that supply TT bars indirectly (via international dealers) have seen their margins on TT bars fall substantially, from around US$ 1.25 - 1.50 per ounce in the early 1990s to less than 70 cents in 2002. BULLION DEALERS Secondary tier dealers The relatively few domestic dealers that buy TT bars in bulk from bank importers normally place an accumulated order on behalf of several subsidiary customers (e.g. lower tier dealers and large jewellery businesses) in order to eliminate or reduce their exposure to an unexpected fall in the rupee gold price. When acting on behalf of others, their margins tend to be small, usually less than Rs 50 per ounce. When buying on their own account, their profit or loss is dependent on movements in the standard bullion price. Lower tier dealers Tertiary and lower tier dealers may also reduce their risk by acting on behalf of others. However, in the absence of a hedging facility, both large and smaller dealers (and their customers) are exposed to unexpected falls in the gold price. Their profit or loss is dependent on movements in the standard bullion price, and sometimes the prevailing price of unofficial imports of TT bars. For this reason, most lower tier dealers (and their customers) tend to buy TT bars in small quantities, often on a daily basis. 154 AN INTRODUCTION TO THE INDIAN GOLD MARKET
Recycling of old gold scrap and bars The bulk of dishoarded jewellery is bought back (from known customers), or exchanged for new jewellery, by jewellery retailers. However, where the retailer from which the jewellery has been bought is not accessible (e.g. closed down, or located far away), some lower tier bullion dealers, some refiners, as well as specialised scrap dealers will buy back old jewellery (as well as bars and coins) for cash. The price is usually based on a conservative estimate of the caratage. PRICING AN IMPORTED 10 TOLA BAR The schedule illustrates a method of calculating a bank’s TT wholesale price in rupees, assuming a gold price of US$ 300 and an exchange rate of Rs 48. Bank importers normally mark-up imported TT bars by around 0.1%. The mark-up can vary according to prevailing supply and demand. Description Amount Calculation US$ gold price per oz. Quoted by international dealer. $ 300 Add gross mark-up per oz charged by international dealer, inclusive of delivery. Assume: US$ 85 per oz. $ 300.85 $300 plus $0.85 US$ price of a TT bar. Gross weight: 3.75 oz. Purity: 999 purity. $ 1,126.98 $300.85 x 3.746 oz Conversion to rupees. Assume exchange rate: US$ 1.00 = Rs 48 Rs 54,095.04 $ 1,126.98 x Rs 48 Add Customs duty per oz. Assume: Rs 250 per 10 g. Gross TT weight: 116.64 g Rs 2,916.00 Rs 250 x 11.664 Cost before State and other taxes Rs 57,011.04 Rs 54,095.04 plus Rs 2,916. Add State sales and other taxes per TT Assume 1.15% Rs 655.62 Rs 57,011.04 x 0.115 Total cost to bank per TT Rs 57,666.66 Rs 57,011.04 plus Rs 655.62 Add bank gross mark-up Assume 0.1% Rs 57.66 Rs 57,666.66 x 0.001 TT wholesale price Rs 57,726.52 Rs 57,666.66 plus Rs 57.66 Percentage above international gold price 7.01% $ 300 x 48 x 3.746 = Rs 53,942.40. Additional statistics: - Bank gross mark-up per oz in rupees Rs 15.39 Rs 57.66 divided by 3.746 - Bank gross mark-up per oz in US$ $ 0.32 Rs 15.39 divided by 48 Source: Bank importer. PRICING AND PROFITABILITY AN INTRODUCTION TO THE INDIAN GOLD MARKET 155
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AN INTRODUCTION TO THE INDIAN GOLD
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INDUSTRY SUPPORT MAJOR SPONSOR CORP
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PREFACE An Introduction to the Indi
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ACKNOWLEDGEMENTS GIR FIELDTRIPS GIR
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Raman Jethi Ramchand Popley Ramesh
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SUMMARY AND POSITIVE FINDINGS BACKG
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SUMMARY AND POSITIVE FINDINGS To ma
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SUMMARY AND POSITIVE FINDINGS The a
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SUMMARY AND POSITIVE FINDINGS POSIT
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SUMMARY AND POSITIVE FINDINGS INDUS
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ROLE OF INDIAN GOVERNMENT The India
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ROLE OF INDIAN GOVERNMENT The Depar
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ROLE OF INDIAN GOVERNMENT OFFICIAL
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ROLE OF INDIAN GOVERNMENT In summar
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ROLE OF INDIAN GOVERNMENT GOLD CONT
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ROLE OF INDIAN GOVERNMENT LICENSED
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MAP OF INDIA There are 28 States, 6
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POPULATION URBAN AND RURAL State Mi
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POPULATION HOUSEHOLDS - SPLIT BY SO
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ECONOMIC INDICES STATES - INDICATIV
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AGRICULTURE VALUE OF AGRICULTURAL O
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AGRICULTURE MAJOR CROPS - NORMAL AR
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MONSOONS PERFORMANCE OF SOUTH WEST
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IMPORTED GOLD BARS The 10 tola bar
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IMPORTED GOLD BARS 10 TOLA BARS AGR
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IMPORTED GOLD BARS GOLD WEIGHT CONV
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The fine gold content of a London G
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BULLION IMPORTERS UNOFFICIAL IMPORT
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BANKS IMPORTED BULLION PRODUCTS Ban
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WHOLESALING TO DOMESTIC BULLION DEA
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BANKS BACKGROUND INFORMATION ON BAN
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BANKS GOLD CELL BRANCHES Region/Sta
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GOLD DEPOSIT SCHEME DISTRIBUTION Th
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GOLD DEPOSIT SCHEME The State Bank
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PUBLIC SECTOR UNDERTAKINGS BRANCHES
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Region/State City MMTC HHEC STC PEC
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NON-RESIDENT INDIAN (NRI) GOLD IMPO
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BULLION DEALERS A secondary tier bu
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GOLD REFINERS SMALL REFINERS There
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COIN FABRICATORS Corporate gifts Al
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COIN FABRICATORS A bullion dealer t
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BAR HOARDING Some trade entities in
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BULK DELIVERY OF OFFICIAL GOLD IMPO
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BULK DELIVERY OF OFFICIAL GOLD IMPO
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PERSPECTIVE INDIA The gold jeweller
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GOLD JEWELLERY PRODUCTS Handmade je
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REGIONAL JEWELLERY STYLES KOLKATA K
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REGIONAL JEWELLERY STYLES AHMEDABAD
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REGIONAL JEWELLERY STYLES SWAMI JEW
Page 105 and 106: JEWELLERY FABRICATORS All centres,
Page 107 and 108: JEWELLERY FABRICATORS JEWELLERY WHO
Page 109 and 110: TRADITIONAL JEWELLERY RETAILERS Sta
Page 111 and 112: TRADITIONAL JEWELLERY RETAILERS Coi
Page 113 and 114: TRADITIONAL JEWELLERY RETAILERS ANT
Page 115 and 116: TRADITIONAL JEWELLERY RETAILERS Man
Page 117 and 118: ADORNMENT DIMENSION Gold jewellery
Page 119 and 120: GOLD JEWELLERY CONSUMERS MARRIAGES
Page 121 and 122: GOLD JEWELLERY CONSUMERS Among larg
Page 123 and 124: GOLD JEWELLERY CONSUMERS RURAL VERS
Page 125 and 126: GOLD JEWELLERY CONSUMERS Gold jewel
Page 127 and 128: GOLD JEWELLERY CONSUMERS INDICATIVE
Page 129 and 130: LUNAR CALENDAR Mumbai (Maharashtra)
Page 131 and 132: BRANDED JEWELLERY RETAIL CHAINS DIS
Page 133 and 134: Region/State Gili Tanishq Carbon In
Page 135 and 136: HALLMARKS In accordance with BIS pr
Page 137 and 138: HALLMARKING Most jewellery in the W
Page 139 and 140: SOURCES OF GOLD BULLION Jewellery e
Page 141 and 142: Location US dollars in millions % S
Page 143 and 144: Plain gold jewellery Location US$ m
Page 145 and 146: INDUSTRIAL GOLD USAGE Since the rep
Page 147 and 148: INDUSTRIAL GOLD USAGE IMITATION GOL
Page 149 and 150: MUMBAI GOLD PRICES Indian gold pric
Page 151 and 152: MUMBAI GOLD PRICES INDICATIVE DIFFE
Page 153 and 154: MONTHLY 2000 - 2001 2000 MUMBAI LON
Page 155: PRICING AND PROFITABILITY Bank impo
Page 159 and 160: JEWELLERY WHOLESALERS Jewellery who
Page 161 and 162: Hallmarking charges The few hundred
Page 163 and 164: PRICING AND PROFITABILITY MINTED CO
Page 165 and 166: GOLD MINING AND EXPLORATION For 36
Page 167 and 168: Year Tonnes Year Tonnes 1970 3.241
Page 169 and 170: GOLD SUPPLY AND DEMAND Movements in
Page 171 and 172: GOLD SUPPLY AND DEMAND The trade at
Page 173 and 174: For the domestic market 1990 - 2001
Page 175 and 176: GOLD SUPPLY AND DEMAND INDICATIVE G
Page 177 and 178: GOLD SUPPLY AND DEMAND INDICATIVE A
Page 179 and 180: WORLD GOLD COUNCIL The World Gold C
Page 181 and 182: WORLD GOLD COUNCIL TRADITIONAL GOLD
Page 183 and 184: WORLD GOLD COUNCIL LOCAL FESTIVALS
Page 185 and 186: WORLD GOLD COUNCIL YOUNGER GENERATI
Page 187 and 188: Indian Overseas Bank Precious Metal
Page 189 and 190: REFINERS AND COIN FABRICATORS WEST
Page 191 and 192: BIBLIOGRAPHY Agricultural Statistic
Page 193 and 194: ABOUT GRENDON INTERNATIONAL RESEARC
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Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

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