Gold is shiny and glamorous yellow metal. It is soft, highly malleable and ductile. It is the most malleable metal, and just one ounce of it can be stretched to approximately 300 square feet. It also has a high resistance to oxidation. These properties of gold make it versatile.
Like other commodities, gold is also looked upon as an investment and is traded actively on MCX.
It is one of the most liquid bullion contracts with daily trades that amount to 18000 contracts that translate into over INR 5400cr.
Different types of Gold contracts available on MCX
There are four variants of contracts trading on MCX:
- Gold (The Big Gold)
- Gold Mini
- Gold Guinea
- Gold Petal
All these contracts have the same underlying, i.e., gold, but they all have different contract specifications.
IT is a rare commodity, and it is also considered as precious since it is looked upon as the safest investment at the time of uncertainties.
The total supply of gold, as estimated by an analyst, is 170,000 tones.
It is mined on all the continents except in Antarctica.
Top 5 Gold producing countries
- United States of America
Top 5 countries having most reserves
Main Uses of Gold
- Jewelry: For more than thousands of years, gold is used as a piece of jewelry. It has great demand as a piece of jewelry in both national and international markets. Watches, Bracelets, bangles, earrings, necklace sets are some of the examples of jewelry
- Technology: It is a good conductor of electricity and is thus used in many industries. Some of the sectors where gold is used are:
- Space Industry: It is highly reflective, and therefore is used in space vehicles such as spacecraft and satellites to protect them from solar radiation.
- Conducting: Since It does not erode, it acts as a reliable conductor allowing for the rapid and accurate transmission of digital data from one device to another.
- Electronics: A small amount of gold is found in almost all the electronic device such as a laptop, mobile, calculators, and computers.
- Dentistry: Since it is bio-compatible, dentist use it to fill cavities, make crown and bridges, and orthodontic appliances.
- Medicinal: It has specific medicinal and healing properties, as well. It is commonly used to treat patients with arthritis. Gold salts are used to reduce swelling, bone damage and relieve joint pains and stiffness.
- Investments: It is considered as a safe bet against the inflation and uncertainties. As an investment, gold is held as bars and coins. The modern way to invest is to invest in the fund that invests in the yellow metal.
Factors affecting the market price of the gold
- Supply and Demand: As all commodities, gold prices are also determined by its supply and demand in the market. Mining of it is a lengthy and costly process. Most of the time, the need for it exceeds its supply and thus resulting in soaring prices of this yellow metal.
- Central Bank policies: Central Government’s action can move the gold’s prices in two ways- By contracting and expanding the money supply. Central Bank holds huge reserves. So any action that leads to accumulate or sell reserves can move the gold market.
- Demand for ETFs that invest in gold: Most of these ETFs purchase a bulk of physical gold and store it. More demand for these ETFs can move the price in the spot market.
Reasons for Investing in Gold
- Hedge against inflation
- Portfolio diversification
- Growing demand
- Safer Investment to combat uncertainty