Impact of Select Factors on Gold Prices in India

Abstract

Gold has been preferred as an investment option by Indian investors. The other alternatives for investment are stocks, bonds and other precious metals such as silver and platinum. Indians prefer buying physical gold as there is emotional attachment. India is currently the largest importer of gold and consumes one-third of supply of gold in the world annually. BSE Sensex and Nifty are benchmark indices of the stock market. This paper aims at studying the impact of factors such as BSE Sensex, NSE Nifty and precious metals such as silver on gold prices. Statistical tools such as correlation and regression are used to identify the relation between each of these variables with gold prices. The study shows that there is positive correlation between Sensex and Gold prices, and Nifty and Gold prices. R value is significant for Sensex and Nifty. Variation in Sensex and Nifty may have an impact on gold prices. There is positive correlation between Silver prices and Gold prices, but R value is insignificant. Therefore variation in silver prices may not impact variation in gold prices but variation in Sensex and Nifty may impact gold prices.