Gold fortunes when markets crash!

Gold becomes critical when the stock markets crash - often it has become the norm that when markets crash gloablly the fund flows into to buy gold, thus driving the price of gold higher and viseversa.

Hence this posting on Gold - as now with the markets crashing people are flocking to buy gold and numerous banks are selling gold bars and mudras etc. It is important to understand the weightage price breakup.

Often people confuse in the conversion of 1 ordinary Oz & 1 Troy Ounce.

1 troy ounce ......= 31.10grams (Rounded off to 2 decimal)

1 Ordinary Ounce = 28.35 Grams or 1 Pound = 16 Oz = 453.6 gm

Current International Price = US$ 876 per Troy Ounce(1 Troy Oz= 31.10)

Price per Gram ................... = US$ 876/31.10 = $28.17

Price for 10 Gram ............... = US$ 281.70

Import duty@ 2% ............. = US$ 5.63

Importation Cost/Ins ........ = US$ (X)

Total Import Cost (CIF).......... = US$ 287.33

(ignoring X)Rupee Rate (Customers) ......... = Rs 41.02

Import Cost per 10 Gm in Rs........= Rs 11,786.28

Local Sales Tax @ 2% ..........= Rs 235.72

Bank's Profit Margin ..............= say,

Hence TOTAL SELLING PRICE ...............= Rs 12,022.00 + X + Y

Banks' Rate to Customer .............= Rs 13,500

Difference ........................= Rs 13,500 - Rs 12,022

Bank's Gross Margin ...............= Rs 1,478 (or 12.22%)

Even if we add the Bank's profit and Transportation cost of about 2.22%, the Bank's profit margin comes to 10%. Now, the difference between 1 Troy Ounce and 1 Ordinary Ounce = 31.10 - 28.35 = 2.75 or 9.70%.

USA PRACTICE: Visit American Precious Metal Exchange who charges normal international prices for the gold bar. However, if some one ask for Gold Coins or other form with Assaying certificate, the charges are significantly higher.IN APMEX, they also buy back the bar which trades at premium to international prices. So, if you want to sell, you also get the higher price.many cases you are a big loser. The moment you buy the gold, you are losing straight away 10% because they will never buy backIt is said that BUYERS BEWARE.