A Study on Indian Gold price and Stock Market Volatility

Abstract

Gold has multiple attributes and its price is affected by various factors in the market. The Indian stock market is highly volatile. The effect of one market on another market is not new. However, the variations in the degree of impact and co-movement between the market need to be examined. Given the importance of gold in India, there are significant issues in a portfolio selection in the country. The Stock market price can be used to predict the gold price. This study examines the gold price volatility and the causal relationship between gold prices and stock market returns in India. Taking into consideration the domestic gold prices and stock market returns based on NSE and BSE, the study investigates the simple relationship between gold price, BSE and NSE for the period from 2013-14 to 2023-24. Indians have started considering gold not only as jewellery but also an important mode of investment like investment in bonds, equities and shares. The analysis concludes that there is no short-term causal link between the price of gold and the price of stocks. Nonetheless, the co-integration of the gold price and the stock market price suggests a long-term relationship and their mutual movement.