Potential Impact on Petroleum Product Prices - Case Study Example

A stock chart is a 2-dimensional chart with two axes - a vertical and a horizontal. The vertical axis shows stock price and horizontal axis shows time. When wholly viewed, chart for a particular stock tells us about prices for the stock i.e. it’s position in the past, stock fluctuations, it’s peak for the past week /month/year and lowest achieved point in the past week /month/year. When observed over a particular time period helps find important information. For instance, in case of a step drop or peak, then the reason for this has to be found. There is a decline in stock market for SPDR Gold shares. It starts at its peak of $173 on 5th of October 2012 and by 2th of November the following month it’s at its lowest point of about $162.6.After 2nd of November the shares are gaining value to a stunning $166.3 by 6th of the same month. The same decline is shown by the trend line which indicates the average closing stock shares reducing from $172 on 5th October 2012 to about $163.5 on 6th of November. A different trend is exhibited for the United States Oil closing shares. Shares are stable as for 10 days with minimal fluctuations from 8th of October. This is after a rise from decline for previous days(shares are at 33.5 on 5th October).Between 18th and 24th of October, closing shares drop to about 31.7 from 34.1 after which they stabilize again though at about 31.7.Closing stocks hit their lowest value(about 31.3) on 2nd November after which it begins to gain value again. The value of Shares relates directly to value of gold/oil held by the Trust therefore fluctuations in gold/oil price materially affected investment in the Shares. The price of gold/oil fluctuated over these period. These were due to; Global gold/oil supply and demand, Purchases, sales, production and cost levels in key gold/oil-producing countries (i.e. South Africa, the United States and Australia for gold and Saudi Arabia, Iran and Nigeria for Oil),Investors’ anticipations with respect to inflation rate, Currency exchange rates, Rates of Interest, political, economic and financial instability worldwide The value of Shares relates directly to value of gold/oil held by the Trust therefore fluctuations in gold/oil price materially affected investment in the Shares. The price of gold/oil fluctuated over these period. These were due to; Global gold/oil supply and demand, Purchases, sales, production and cost levels in key gold/oil-producing countries (i.e. South Africa, the United States and Australia for gold and Saudi Arabia, Iran and Nigeria for Oil),Investors’ anticipations with respect to inflation rate, Currency exchange rates, Rates of Interest, political, economic and financial instability worldwide. Purchase activity in gold/oil market associated with the purchase of Baskets from the Trust caused a temporary increase in the price of gold/oil. These affected investment in the Shares. Temporary increase in the market price of gold/oil also was as a result of the purchase activity of other market participants. These participants attempted to benefit from an increase in the market price of gold/oil that resulted from increased purchasing activity of gold/oil linked to the issuance of Baskets. Consequently, gold/oil market price declined immediately after Baskets were created. The process of creation and redemption of Baskets encountered unanticipated difficulties, arbitrage transactions were to keep the price of the Shares connected to the price of gold/oil but this was contrary and, as a result, the price of the Shares fell. Also in the same process it encountered market participants who were willing to purchase and redeem Baskets to take advantage of arbitrage opportunity that arose ///from discrepancies between the price of the Shares and the price of the underlying gold// could not take the risk that, hence did not realize the profit they expected. In this scenario, the liquidity of Shares declined and the price of the Shares varied independently of the price of gold/oil. Gap analysis is used for prioritizing as it tells changes needed, not just how well the shares are doing. A gap in a stock chart shows the variations in the closing values of shares for different days. Gap ///would have to occur between Friday's close and Monday's open for weekly charts and between the last day of the month's close and the first day of the next month's for the monthly charts. (Analyzing Gaps for Profitable Trading Strategies by Julie R. Dahlquist, Ph.D., CMT and Richard J.//// Bauer, Jr., Ph.D., CFA, CMT) The Shares we trading at prices which were above or below the NAV per Share hence any discount or premium for trading price relative to the NAV per Share widened// as a result of non-concurrent trading hours for the NYSE Arca and London, Zurich and COMEX.The trading price of the Shares varied in accordance with changes in the NAV per Share as well as market supply and demand./// ////Historical splits may also be viewed for the charting period by clicking on that option i///.e. Chart Range- The time period covered by the chart. Chart Elements -Provides charting options present for ///the user, from the standard Price/Volume representation to comparisons and moving averages. Volume - The/// official daily closing volumes shown graphically for each trading day. Investors observe these trends to judge on current and future direction of a stock. In these respect it’s easier to determine a stock trend by observing stock prices over time, along with the sum total volume made on a ///trading day in relation to the closing price for the day.// (http://www.nasdaq.com/quotes/stock-charts.aspx) Considering prevailing risk factors, we now look at the causes for the fluctuations in the shares of Gold and oil value as observed on the chart. The liquidity of Shares was affected by the withdrawal of a number of authorized Participants. Some participants were responsible for ///significant portion of the Shares’ daily trading volume on the Exchange// there withdrawal caused the liquidity of the Shares to decrease. These made the market price of the Shares and the result of incurring a loss on your investment. (15,550,000// ETFS Physical Swiss Gold Shares, ETFS Gold Trust, //April 13, 2011; pg 3-7) By relying only on the 21 day chart on this page you would make a conclusion that the market shares is not doing well, but when the shares are observed over a longer period of time a different perspective can be learned. This is why the Gold world Team tells in the Wealth Daily’s’ that gold the most popular investment hedge against any political, economic, or social crises, Because it is liability ,free self contained, and universally valued. Few other assets can compare. References 1. The Gold Rush of the1930s Will Rise Again, by Ian Gordon, June 2012,Longwave group 2. Analyzing Gaps for Profitable Trading Strategies By Julie R. Dahlquist, Ph.D., CMT and Richard J. Bauer, Jr., Ph.D., CFA, CMT 3. 15,550,000 ETFS Physical Swiss Gold Shares, ETFS Gold Trust, April 13, 2011 4. Edgar Online, Inc. Data supplied by ILX Systems, Inc. http://www.nasdaq.com/quotes/stock-charts.aspx 5. independent-stock-investing 6. http://www.independent-stock-investing.com/Line-Chart.html 7. A study on factors affecting the share price of an oil company Baibhav Bajpai Aegis Global Academy, Coimbatore 8. Potential Impact on Petroleum Product Prices, March 2007, Energy Information Administration, Office of Oil and Gas, U.S. Department of Energy Read More