Exploring the Dynamics of Gold Prices in India: Factors and Trends

Abstract

Gold is often sought as a hedge against inflation, demonstrating resilience in maintaining its value when other assets experience declines. This research endeavor is designed to inquire into the intricate factors that have led to a substantial upswing in gold prices within the Indian market from the years 2012 to 2022. The foundation of the study rests on secondary data curated from the database of the Reserve Bank of India on the Indian economy. The primary focus of the analysis centers around the annual domestic gold prices, computed by averaging the gold prices for each month throughout a given year. To initiate the investigation, Karl Pearson's correlation coefficient is computed to establish relationships between the identified time series. The significance of these correlations is rigorously examined through ANOVA. The research study underscores the significant influence of key economic indicators, namely the GDP of India, Inflation rate, and Dollar exchange rate, on the fluctuations in gold prices. The statistical significance of these predictors implies their crucial role in shaping the dynamics of the gold market. This empirical evidence holds substantial implications for various stakeholders. Investors are advised to adopt a nuanced approach, considering not only market trends but also the broader economic context, as reflected in the GDP, inflation, and exchange rate factors.