Yes, margins tend to improve drastically when you sell in smaller amounts at the retail level. And you don't have the cost of materials that other retailers have. In this case I wonder about the need though because who can't afford $80 for a gram of gold? But you have been in the gold business for over 15 years so you probably know what is best.
People who go for grams will still go for grams and the most common consumption still remains 1g -- But in today's currency that 80-90 price would been almost Rs 7,000 per gram in Indian Rupees and there are many farmers and district / rural level population whose monthly income itself is not more than Rs 8,000 to Rs 10,000 -- Though they wish to have gold, they are unable to as granules (Fractional Gold) are not still available to the common man. Making it 1/100th ounce will mean 4.8 grains/granules which is like 32% of 1g or Rs 2,250 around -- Typically people save 20% of their earnings and this is hence we have put minimum investment as 4.8 grains instead of 15.43 Grains (1g) - In US too, 4.8 grains is like $25 around ($26.5) and it will help many to put this as weekly savings towards Education Savings Account.
So, 1 brick = 12.4 kg (in inventory).
I noticed some of the older sheets mentioning 100 kg and up to 500 kg after 5 years. Perhaps more.
And 600 grams in sales per agent per month.
It leads to 578 kilos inventory after 5 years and yes each agent is pegged for 600 grams sale
So the question most people would be interested in is, how fast are we going to ramp this up?
There are two fold to this -- One increasing the IRA base to hold the reserve for us to mine gold from IRA accounts in case inventory levels need to rise.
2. Increasing the Agent Spread -- We are focussing on both numbers -- IRA we plan pushing the numbers to 150,000 as that gives us yearly 7,000 contributions from each IRA Customer who intends subscribing for gold (Typically 100g at current level). In India the inventory that we plan carrying can be sole as a daily turnover but we prefer to keep it at weekly cycle as otherwise we will be exhausting the agent distribution.
How much in sales do we expect?
We will be able to generate to have 22 grains (year 1), 106 grains (year2), 514 grains (year3), 2,537 grains (year 4) and 12,725 grains (1 Brick) (year5) ...This means we will be generating 223 grains in worst case scenario and 2,473 grains in best case following a weekly inventory cycling of 4.8 grains and 7.5% dividend payout. 1 Brick of 400 ounces in year1 will be 1,060,440 ounces at the end of 5 years assuming 5 days cycle on an average of which investor gains 2/3rds. In the worst of the worst case, it will be 42,210 ounces with 28,140 getting into investors kitty
What would be a reasonable cycle rate globally in large quantities, perhaps 6 days (60x per year) ? --
5 days is very safe to assume, 72 cycles in a year... Initially 1 brick will easily get consumed on a daily basis but as it compounds the increased inventory pushed into retail will mean increased turnover cycle and we will typically see this in year 4 and year 5 from 1 day cycle it will be 10 days cycles to push sales because of the larger inventory quantity we will be carrying. But average of 5 days can be safely considered. After the 5th year, we have to distribute gold to reduce inventory levels as inventory levels will go beyond 12 days to 15 days cycling and it is not viable at 15 days and turns negative inventory carrying which most banks are facing currently.
And then we can calculate the expected yield per year. For the first year. For 1 year.
1 brick in granules ($1 million) will offer us $2.66 B in sales inventory (5 days inventory cycling) that we can distribute and start fresh.
We gain, $1.16 Billion as our share.
These figures are achievable with a very strict financial reengineering and compounding, assuming 100% reinvestment of surplus grains for 5 years that generate and accumulate cycle after cycle. But none of the figures can ever be taken as guaranteed - one has to assume prudence in making their investment decisions as gold is susceptible to inherent market, geopolitical, economic and currency risks like any other commodity or security instrument and one can get washed off completely - One has to assume their capacity to tolerate any untoward and unexpected risks that gold will present like any other investment
AI
