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Evaluation of Gold Market in India and its Price Determinants

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  • S.Venkata SESHAIAH
  • I.R.S.SARMA
  • Aviral kumar TIWARI

Abstract

The study assesses the influence of Oil prices, Exchange rate, trade deficit, and fiscal deficit on the prices of gold in India. Using the Johansen's cointegraion, variance Decomposition and Granger causality test for the period 1994 - 1995 to 2014 -2015 with monthly observations, the study found that all variables are stationary at first difference and that there are two cointegration relationships between Gold prices, crude oil prices, exchange rate, Trade Deficit and Fiscal deficit. This implies that the variables under consideration have a long relationship. The results revealed that the variation in gold prices explained by gold itself by 93.4% where as the other variables’ influence on the variation of gold prices under consideration is negligible. Gold prices and trade deficit contributes 9.43% and 7.92% respectively in the variance of crude oil prices, where as the gold prices and trade deficit contributes 9.73% and 12.22% respectively in the variance of the prices of exchange rate. The variance in the trade deficit was explained by variance in gold price is as high as 11.31% compared all the other variables under consideration

Suggested Citation

  • S.Venkata SESHAIAH & I.R.S.SARMA & Aviral kumar TIWARI, 2017. "Evaluation of Gold Market in India and its Price Determinants," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(1), pages 143-154.
    • Handle: RePEc:eaa:aeinde:v:17:y:2017:i:1_10
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    File URL: http://www.usc.es/~economet/reviews/aeid17110.pdf
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    References listed on IDEAS

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    1. Sjaastad, Larry A. & Scacciavillani, Fabio, 1996. "The price of gold and the exchange rate," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 879-897, December.
    2. Sjaastad, Larry A., 2008. "The price of gold and the exchange rates: Once again," Resources Policy, Elsevier, vol. 33(2), pages 118-124, June.
    3. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "The crude oil market and the gold market: Evidence for cointegration, causality and price discovery," Resources Policy, Elsevier, vol. 35(3), pages 168-177, September.
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    Cited by:

    1. Subrata Roy, 2020. "Gold & Stock Relation: Investors’ Reaction During Covid-19 Outbreak," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 26, pages 29-52, December.
    2. ROY Subrata, 2020. "Gold & Stock Relation: Investors Reaction During Covid-19 Outbreak," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 72(3), pages 103-126, November.

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