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A Study on Various Factors Impact on the Gold Price in India

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DOI: 10.9734/AJEBA/2023/v23i201109

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 Asian Journal of Economics, Business and Accounting

Volume 23, Issue 20, Page 254-265, 2023; Article no.AJEBA.106980

ISSN: 2456-639X

A Study on Various Factors Impact on

the Gold Price in India
Nisarga M. a++ and Nagendra Marisetty a#*
a REVA Business School (RBS), REVA University, Bangalore, India.

Authors’ contributions

This work was carried out in collaboration between both authors. Both authors read and approved the
final manuscript.

Article Information
DOI: 10.9734/AJEBA/2023/v23i201109

Open Peer Review History:

This journal follows the Advanced Open Peer Review policy. Identity of the Reviewers, Editor(s) and additional Reviewers,
peer review comments, different versions of the manuscript, comments of the editors, etc are available here:
https://www.sdiarticle5.com/review-history/106980

Received: 19/07/2023
Original Research Article Accepted: 23/09/2023
Published: 27/09/2023

ABSTRACT

This study aims to discover the elements that significantly impact gold prices in India.
Understanding the leading causes of gold price changes is essential as it has traditionally been a
significant financial and cultural symbol in India. The study uses a thorough methodology to
examine the evolution of gold prices by combining macroeconomic and market-specific data. The
research starts by evaluating the prior research on the variables that impact the price of gold and
identifies the essential factors. The study also examines the distinctive elements of the Indian
setting, such as regional demand patterns, festival seasons, governmental policies, and
import/export rules. The study offers a more complex picture of the Indian gold market by
considering essential factors. Understanding the variables affecting gold prices in India can help
market participants forecast price changes, help governments create appropriate rules, and help
investors make well-informed decisions.

Keywords: Gold; stock market; economy factors; global economy and exchange rates.

_____________________________________________________________________________________________________
++
Student, MBA, IV Semester;
#
Faculty;
*Corresponding author: E-mail: nagendra.marisetty@gmail.com;

Asian J. Econ. Busin. Acc., vol. 23, no. 20, pp. 254-265, 2023
 Nisarga and Marisetty; Asian J. Econ. Busin. Acc., vol. 23, no. 20, pp. 254-265, 2023; Article no.AJEBA.106980

1. INTRODUCTION 2. LITERATURE REVIEW

Gold is a comparatively dense, shiny yellow Sailaja, V.N et al. [1] investigate the connection
metal. In terms of corrosion, gold is remarkably between gold prices and different
resistant to oxygen and a wide range of other macroeconomic variables in India, showing
chemicals. Gold is a chemical element with the significant effects of inflation, GDP, stock market
atomic number 79 and the symbol Au. The most indices, crude oil prices, and foreign exchange
malleable and ductile metal known to man is rates while finding no significant influence from
gold, which is dense, soft, and shiny. It gold demand and budget deficit, highlighting key
represents cultures, memories, wealth, beauty, factors influencing gold prices in the nation.
and tradition. In addition, gold also makes Pradeep, K.V [2], Gold prices significantly
significant advancements in many different changed when India switched from a regulated to
technologies. Due to its corrosion resistance, a liberalized economy. The prices started to rise
extreme malleability, and ductility, gold is used in as the markets integrated further. This shift also
nanoparticle technology, medicine, and space benefited the jewelry industry due to the
exploration. It also acts as the core bonding wire importation of essential materials and the
for the iPhone. introduction of mechanization. Vallabh, P. [3], In
addition to addressing regulatory concerns,
Gold has always been an essential part of standardized delivery, trade financing
cultural and religious rites and a symbol of considerations, and obstacles faced by traders,
riches. Gold has a special place in the hearts and this paper sheds light on the worries and
minds of people all over India. The value and practices of gold merchants in India, providing
allure of gold have transcended generations, insightful qualitative information for decision-
making it a cherished asset and an integral part makers, stakeholders, and researchers.
of Indian households. The country has a long-
standing affinity for gold, regarded as a symbol of Chainani, R. (2022) examines 30 variables,
wealth, prosperity, and a haven investment. including fundamental, macroeconomic,
India, with its rich cultural heritage and affinity for technical, and Intermarket factors, and their
gold, is one of the largest consumers and effects on COMEX and Indian gold prices. The
importers globally. Various factors, both domestic examination of 36 events identifies key
and international, influence India's gold market. predictors, which offer insightful information for
Investors, merchants, and the public have long models used to anticipate gold prices. Chiang T
been fascinated by and alarmed by the erratic (2022) demonstrates how, in various regional
price of gold. markets, gold protects against market volatility,
geopolitical risk, and uncertain economic policy.
This study examines the complex mechanisms However, in the Indian market, gold also serves
that impact the price changes of gold in an Indian as a money substitute. Tanin T. et al. [4] examine
setting. It seeks to investigate the range of the correlation between oil and gold prices during
economic and social elements that influence this previous crises, revealing a tenuous positive
precious metal's price in the Indian market. relationship and emphasizing the declining
Global trends, domestic economic conditions, predictive power of oil prices on gold prices,
inflation, interest rates, currency changes, particularly in the context of the COVID-19
governmental regulations, the stock market, and pandemic, where gold serves as a safe-haven
consumer attitudes are just a few of the many asset for investors. Choudhary, P. [5]
variables that impact the Indian gold market. In understands the impact of various variables on
addition, this study will examine the gold prices; this study examines them. It
importance of a few elements in affecting gold highlights unexpected results and opposite
prices by analyzing historical data, relationships, particularly regarding India's
present data, and statistical models. The results purchasing power, interest rates, and the lack of
of this study will be helpful to traders and correlation with the Sensex and Nifty indexes.
investors alike, as well as policymakers and
financial institutions. The knowledge collected Sharma S et al. (2021) examine the effects of
from this study will advance the conversation stock market performance, the USD to INR
about gold as an asset class and its exchange rate, and crude oil prices on gold
significance to the Indian economy, eventually prices in India. It finds significant results, with a
leading to a more vibrant and open gold market negative association with oil prices and a positive
in India. relationship with the stock market, including a

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notable error in 2020. Garg, S. [6] remarks on the Gopal S. et al. [12] highlight the interaction
elements that impact investor behavior when it between key macroeconomic variables and stock
comes to gold investments. Gold has always market conditions in developing nations like India
been a popular investment choice in India, by demonstrating the significant influence of the
particularly in the form of jewelry. This study uses gold price, global crude oil price, and US Dollar
factor analysis to investigate the many aspects exchange rate volatility on the Indian stock
that influence investor behavior in the context of market. Mohith S et al. [13] use multiple linear
gold investing. Zhang et al. [7] examine the regression to analyze the relationship between
connection between global oil prices, global gold gold prices and various variables over ten years,
prices, exchange rates, and stock market revealing significant impacts from crude oil
indices, revealing the long-term negative impact prices, currency rates, and the Nifty 50 and
of oil prices on exchange rates as well as the offering helpful academic insights into the driving
short-term positive impact of gold prices on forces behind gold prices. Bhunia A. et al. [14]
exchange rates, with implications for monetary examines the relationship between the gold
and fiscal policies. price, exchange rates, and the Sensex in India
from 1991 to 2013. It uncovers a long-term
Daga, V. et al. [8] look at how macroeconomic relationship and increased investor interest in the
variables affect gold prices in the Indian stock market with rising gold prices.
economy. It finds a weak correlation with crude
oil prices and a strong correlation with exchange Tripathi, L.K [15] finds a relationship between
rates, giving policymakers, analysts, and gold prices in India and various global factors
investors vital information to use when making examined in this article, and it is discovered that
decisions. Saha, K. (2019) investigates the links there is a long-term relationship between them.
between gold prices and macroeconomic factors. The gold price in India Granger causes the
The study tackles the absence of prominent exchange rate (USD) and crude oil price, but
empirical trends in this domain and the need for global influences do not cause the gold price in
more work following the 2008 financial crisis. The India. Chandani, A. [16] provides an overview of
study examines the link between the gold price significant international research on the factors
and the characteristics stated above using daily influencing gold prices, analyzing its trends and
data from July 2008 to December 2018. movements using data from reliable sources,
Beckmann et al. [9] investigate the relationship with a focus on studies conducted in the last ten
between gold prices, bonds, equities, and years and encompassing various parameters
exchange rates, demonstrating the changing and comparisons with financial products like the
roles of gold as a hedge and safe place US dollar and crude oil. Baber, P. (2013), the
throughout the 2008 financial crisis and impact of the global business climate, political
highlighting the intricate and dynamic interaction environment, market conditions, commodities
between uncertainty assessments and gold price market integration, consumer behavior, and
variations. inflation are all examined in this extensive
research study, which sheds light on the
Shashikala Parimi (2018) determines the factors historical growth and economic correlations
influencing gold prices in the Indian context in behind India's significant rise in gold prices from
this insightful study, which explores the historical 2002 to 2012.
value of gold, increased consumption during
economic growth, and the significance of Sindhu R [17] investigates the relationship
security, liquidity, and portfolio diversification. between gold prices and significant factors,
Sahaida Laily [10] investigates and demonstrates including the USD to INR exchange rate, crude
substantial connections between macroeconomic oil prices, repo rate, and inflation rate, revealing
variables and gold prices, showing a positive link an inverse relationship with the US dollar, a
with crude oil prices and a negative correlation connection to repo rates, and a positive
with GDP, real interest rates, and inflation rates. correlation with inflation rates. Bhunia A. et al.
Exchange rates have no significant impact. [18] examines the relationship between domestic
Seshaiah, S.V. et al. [11] look at how trade gold prices and Indian stock price indices,
imbalances and budget deficits affect the concluding that during stock market decline and
volatility of crude oil prices and exchange rates currency depreciation periods, gold prices rise
and how they affect the price of gold in India. It due to strong domestic demand. Singh, P. (2013)
concludes that while these variables have a studies gold price trends, demand, volatility, and
small impact on gold prices. the reasons driving rising gold prices in the

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Indian economy. It also offers a comparison of study used SPSS for descriptive statistics and
gold trends and patterns in India and China, correlation analysis, while Excel was utilized for
which provides vital insights into the dynamics of regression analysis. Descriptive statistics will
the gold market in both countries. offer an overview of the dataset, followed by
correlation analysis, determining the correlations
Sarvaiya, D (2013) compares the performance of between the variables. The predictive ability of
ARIMA and LSTM using a 7-year dataset of daily the variables will be investigated using Excel
gold prices to determine whether the method is regression analysis. The study aims to provide
more successful at projecting gold prices using valuable insights for decision-making based on
historical data. Mukhuti S. et al. [19] suggest that the analysed data.
gold prices in India were influenced by stock
market movements and macroeconomic factors, 3.3 Variables
especially during crises, bank failures, currency
devaluation, and negative real interest rates. 3.3.1 Dependent variable
Toraman, C. [20] investigates the variables
influencing gold prices, particularly considering Gold: Gold prices are the study's dependent
the previous financial crisis and the present variable. Until recently, Gold was a relative
increase in gold prices [21-26]. The study benchmark for currency equivalents specific to
discovered a high negative link between gold economic regions or nations throughout recorded
prices and the US exchange rate and a positive history. The price of Gold fluctuates based on a
association between gold prices and oil prices. variety of factors. When there is economic
instability or international conflict, more
3. METHODOLOGY individuals desire to buy Gold, which drives the
price. The availability of Gold and the level of
3.1 Objectives demand for it both influence its price. As a result,
the price of Gold fluctuates like a see-saw due to
• To know the descriptive statistics of the these several factors.
selected variables
• To analyze the correlation between 3.3.2 Independent variables
selected variables.
• To examine the selected factors' impact on The various Independent that are assumed to
gold prices in India. affect the prices of Gold in the short run are as
follows:
3.2 Hypothesis
BSE SENSEX: India's main stock market index
Correlation of Coefficient: is the BSE Sensex, sometimes known as the
Sensex. It provides a picture of the performance
H0: There is no significant relationship of the nation's stock market by including the thirty
between the factors and gold price. biggest and most actively traded businesses on
H1: There is a significant relationship the Bombay Stock Exchange (BSE). The Sensex
between the factors and gold price. serves as an essential benchmark and offers
information on the state and outlook of the Indian
Multiple Linear Regression: financial markets. Its different areas of
ownership, from banking to technology, impact
H0: There is no significant impact of the the index's movement.
factors on the gold price.
H1: There is a significant impact of the Crude Oil Price: The cost of a barrel of
factors on the gold price. conventional crude oil is represented by its spot
price. The grade of the oil, which is governed by
The study is focused on identifying the factors elements including specific gravity, sulfur
that impact gold prices in India. The study uses content, and extraction site, affects the price.
secondary data from reliable financial websites, These elements affect its use and quality,
the BSE website, and other relevant resources to affecting its market worth. The state of the global
analyze the determinants driving gold prices in macro economy significantly impacts how much
India, including BSE Sensex, crude oil, inflation, oil is demanded. Oil use is influenced by
exchange rates, and repo rates. The study economic expansion, industrial output, and
encompasses a period of five-year time. The consumer behavior. In addition, supply

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disruptions and geopolitical concerns may cause increasing the cost of borrowing and reducing
price changes. The oil price is a significant excessive expenditure. This instrument is crucial
indicator of economic health and can affect to monetary policy because it enables central
inflation and general market stability due to its banks to control economic expansion and price
importance as a primary energy source. stability.

Inflation: The term "inflation" describes a long- 4. DATA ANALYSIS

term, steady rise in the prices of goods and
services within an economy. Over time, this 4.1 5 Years Data (2018 – 2022)
process causes the value of money to decline,
raising prices for both people and businesses. As
The data shows descriptive statistics for six
money can buy fewer goods and services, its
variables: "gold," "BSE Sensex," "crude oil,"
purchasing power decreases. Indicators like the
"inflation," "exchange rate," and "repo rate." The
Consumer Price Index (CPI) and the Producer
values range from 29644.00 to 53941.00, with an
Price Index (PPI) are frequently used to assess
average of 42203.9167 and a standard deviation
the effects of inflation. While the PPI looks at
of 8362.91381. The "inflation" variable fluctuates
price changes at the production level, the CPI
from 136.40 to 176.70, while the "exchange rate"
analyses the cost of a basket of consumer
variable ranges from 63.61 to 82.71. In
products.
conclusion, the dataset provides insight on how
Exchange Rate (ER): An exchange rate (ER) these variables are statistically distributed.
indicates the relative value of two currencies and Notably, while the "inflation," "exchange rate,"
establishes the ratio at which they can be and "repo rate" variables have comparatively
exchanged on the foreign exchange market. This lower variability, the "gold," "BSE Sensex," and
crucial statistic directs cross-border trade and "crude oil" variables exhibit significant variations
finance transactions between companies and as shown by their greater standard deviations
people. Interest rates, inflation rates, and (Table 1).
economic stability are only a few economic
factors that impact exchange rates. Exchange The correlation matrix shows how the different
rate dynamics are also influenced by central variables relate to one another. Between "gold"
bank policy and market sentiment. These rates and "inflation" (0.909) and "gold" and "exchange
are crucial to international trade because they rate" (0.827), there are notable, positive
affect export-import dynamics and national connections. The correlation between "inflation"
competitiveness. and the “exchange rate" is also very positive
(0.878). Additionally, there is a
Repo Rate (Repurchase rate): The repo rate is moderate correlation between the "BSE Sensex"
the interest rate at which the central bank lends and “gold" (0.675), as are " BSE Sensex" and "
money to commercial banks for brief periods, inflation” (0.884). There is a negative correlation
typically to control their liquidity. Lowering the between the "crude oil" variable and "gold" (-
repo rate reduces banks' borrowing costs, 0.606), "BSE Sensex" (-0.020), and "inflation" (-
encouraging economic activity by making 0.302). In addition, there is a high negative
borrowing more accessible to firms and correlation between "repo rate" and "gold" (-
consumers. On the other hand, raising the repo 0.765), as well as between "repo rate" and
rate might be a tactic to restrain inflation by "inflation" (-0.555).

Table 1. Descriptive Statistics of the selected variables for the period of five years

Particulars N Minimum Maximum Mean Std. Deviation

Gold 60 29644.00 53941.00 42203.9167 8362.91381
BSE Sensex 60 29486.49 63099.65 44797.56 9821.516
Crude oil 60 1959.30 13248.50 7832.7700 2794.19545
Inflation 60 136.40 176.70 153.9333 12.52325
Exchange rate 60 63.61 82.71 72.8252 4.08388
Repo rate 60 4.00 6.50 5.0517 .95872
Valid N (listwise) 60
(Source: Author’s calculations by using the available data in the different websites)

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Table 2. Pearson’s correlation between selected variables for the period of five years (N = 60)

Particulars Gold BSE Inflation Exchange Crude Repo

Sensex rate oil rate
Gold Correlation 1 .675** .909** .827** -.606** -.765**
Sig. (2-tailed) .000 .000 .000 .000 .000
BSE Sensex Correlation .675** 1 .884** .670** -.020 -.390**
Sig. (2-tailed) .000 .000 .000 .878 .002
Inflation Correlation .909** .884** 1 .878** -.302* -.555**
Sig. (2-tailed) .000 .000 .000 .019 .000
Exchange Correlation .827** .670** .878** 1 -.356** -.376**
rate Sig. (2-tailed) .000 .000 .000 .005 .003
Crude oil Correlation -.606** -.020 -.302* -.356** 1 .741**
Sig. (2-tailed) .000 .878 .019 .005 .000
Repo rate Correlation -.765** -.390** -.555** -.376** .741** 1
Sig. (2-tailed) .000 .002 .000 .003 .000
**. Correlation is significant at the 0.01 level (2-tailed)
*. Correlation is significant at the 0.05 level (2-tailed)
(Source: Author’s calculations by using the available data in the different websites)

In conclusion, the correlation matrix reveals a The results of the regression analysis show that
number of significant and strong correlations the model fits well, and that the variables "BSE
between the variables. Notably, while "crude oil" SENSEX," "Crude Oil," "Inflation," and "Repo"
and "repo rate" stand out for their separate are all very significant in predicting the
relationships with the other variables, "gold," dependent variable. However, "Exchange
"BSE Sensex," "inflation," and "exchange rate" Rate's" impact displays a non-significant p-value.
are interconnected with one another. various
results provide insight into the connections 4.2 3 Years Data (2020 – 2022)
between various economic indicators.
The data provides descriptive statistics for
The regression analysis shows a strong various economic indicators over 36 instances.
correlation between the dependent variable and Gold prices ranged from 39,984.00 to 53,941.00,
the independent variables, with approximately with a moderate deviation of 3,132.65. The BSE
97.57% of the variance explained by the Sensex fluctuated between 29,486.49 and
independent variables. The model's explanatory 63,099.65, while crude oil prices varied from
power remains even after accounting for the 1,959.30 to 10,887.97. Inflation rates fluctuated
number of variables. The model's accuracy is between 148.60 and 176.70, exchange rates
demonstrated by the average prediction error of ranged from 71.37 to 82.71, and repo rates had
0.034011 and the low p-value (0.0000) in the limited fluctuations.
ANOVA table. The coefficients indicate that unit
increases in "BSE SENSEX" correspond to a As a result, the presented descriptive statistics
decrease in the dependent variable, while show how different economic indicators have
"Inflation" and "Exchange Rate" have limited behaved during the specified time frame. While
statistical significance. inflation, currency rates, and the repurchase rate

Table 3. Multiple regression analysis of the dependent variable gold for the period of five years
(N = 60)

Particulars Coefficients Standard t Stat P- R Square Adj R F Sign F

Error value Square
Intercept 1.3492 0.4182 3.225 0.002 0.9757 0.9735 434.1 0.000
SENSEX -0.2512 0.0627 -4.007 0.000
Crude Oil -0.0637 0.0216 -2.943 0.005
Inflation 2.3465 0.2512 9.339 0.000
ER 0.2338 0.2238 1.044 0.309
Repo -0.0556 0.0104 -5.348 0.000
(Source: Author’s calculations by using the available data in the different websites)

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Table 4. Descriptive Statistics of the selected variables for the period of five years

Particulars N Minimum Maximum Mean Std. Deviation

Gold 36 39984.00 53941.00 48513.8333 3132.65244
BSE Sensex 36 29486.49 63099.65 49862.53 9666.509
Crude oil 36 1959.30 10887.97 6319.3519 2434.75026
Inflation 36 148.60 176.70 162.3222 8.59748
Exchange rate 36 71.37 82.71 75.2738 2.78920
Repo rate 36 4.00 6.25 4.4403 .67821
Valid N (listwise) 36
(Source: Author’s calculations by using the available data in the different websites)

showed somewhat more stability, gold, and around 0.625. Gold prices and crude oil prices
crude oil prices, as well as the stock market have a weak positive correlation of around 0.275,
index, showed substantial instability. suggesting a minor connection. Gold prices and
Understanding the economic environment during repo rates have a slight relationship. BSE
the observed period is made easier with the help Sensex and inflation have a strong positive
of these statistics, which provide insights into the correlation, with a robust connection between
trends and volatility of these variables. stock market performance and inflation rates.
Inflation and exchange rates have a strong
The correlation matrix reveals the relationship positive correlation, with a strong positive
between gold prices and BSE Sensex have a correlation of around 0.779. Exchange rates
moderate positive correlation, with a strong and crude oil prices have a positive correlation,
positive correlation between gold prices and with a notable relationship between exchange
inflation. Gold prices and exchange rates show rate fluctuations and changes in the repurchase
some alignment, with a positive correlation of rate.

Table 5. Pearson’s correlation between selected variables for the period of three years (N = 36)

Particulars Gold Sensex Inflation Exchange Crude Repo

Gold Correlation 1 .446** .660** .625** .275 .158
Sig. (2-tailed) .006 .000 .000 .105 .358
BSE Correlation .446** 1 .887** .504** .741** .235
Sensex Sig. (2-tailed) .006 .000 .002 .000 .167
Inflation Correlation .660** .887** 1 .776** .779** .478**
Sig. (2-tailed) .000 .000 .000 .000 .003
Exchange Correlation .625** .504** .776** 1 .495** .749**
rate Sig. (2-tailed) .000 .002 .000 .002 .000
Crude oil Correlation .275 .741** .779** .495** 1 .477**
Sig. (2-tailed) .105 .000 .000 .002 .003
Repo rate Correlation .158 .235 .478** .749** .477** 1
Sig. (2-tailed) .358 .167 .003 .000 .003
**. Correlation is significant at the 0.01 level (2-tailed)
(Source: Author’s calculations by using the available data in the different websites)

Table 6. Multiple regression analysis of the dependent variable gold for the period of three
years (N = 36)

Particulars Coefficients Standard t Stat P-value R Adj R F Sign F

Error Square Square
Intercept 1.9868 1.1406 1.741 0.09177 0.7151 0.6676 15.061 0.000
SENSEX -0.1396 0.0861 -1.622 0.11521
Crude Oil -0.0458 0.0322 -1.420 0.16581
Inflation 1.4836 0.5096 2.911 0.00673
ER 0.7818 0.5292 1.477 0.15004
Repo -0.0498 0.0184 -2.706 0.01110
(Source: Author’s calculations by using the available data in the different websites)

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The regression analysis focuses on predicting an 71.5% of the outcome's variability is explained by
outcome variable based on five predictor the model. In general, the important factors in
variables: BSE Sensex, crude oil prices, inflation, figuring out the variation in the outcome variable
exchange rate, and repo rate. Key statistics are inflation and the repo rate.
include multiple correlation coefficients, R
square, adjusted R square, standard error, and 4.3 Year (2023)
observations. The analysis of variance (ANOVA)
tests the model's significance, with the F-statistic The data shows a range of economic indicators
and p-value indicating statistical significance. over 12 observations, including gold prices, BSE
The coefficients represent the estimated impact Sensex values, crude oil prices, inflation rates,
of each predictor variable on the outcome exchange rates, and repo rates. Gold prices
variable. The intercept is not statistically range from 47960.00 to 53941.00, with a mean
significant, while the coefficients for BSE Sensex, of 50944.0000. BSE Sensex values range from
crude oil, exchange rate, and repo rate have p- 53018.94 to 63099.65, with an average of
values higher than the conventional significance 58141.45. Crude oil prices range from 7529.41 to
level. Inflation and repo rates have low p-values, 10887.97, with a mean of 9113.5192. Inflation
indicating statistical significance. rates fluctuate between 165.70 and 176.70, with
a mean of 172.1500.
In results to the regression analysis, both
inflation and the repo rate are significant, with In conclusion, this information provides light on
inflation having a positive impact and the repo the fluctuation and main trends of various
rate having a negative effect. The statistical economic indicators during the given time frame.
significance of other indicators, such as the BSE The standard deviations provide a sense of how
Sensex, crude oil, and exchange rate, is low. volatile or dispersed the values of each indicator.

Table 7. Descriptive Statistics of the selected variables for the period of one year

Particulars N Minimum Maximum Mean Std. Deviation

Gold 12 47960.00 53941.00 50944.0000 1513.76520
BSE Sensex 12 53018.94 63099.65 58141.45 2684.404
Crude oil 12 7529.41 10887.97 9113.5192 957.95583
Inflation 12 165.70 176.70 172.1500 3.94220
Exchange rate 12 74.31 82.71 78.1144 2.85981
repo rate 12 4.00 6.25 4.9625 .87986
Valid N (listwise) 12
(Source: Author’s calculations by using the available data in the different websites)

Table 8. Pearson’s correlation between selected variables for the period of one year (N = 12)

Particulars Gold BSE Inflation Exchange Crude Repo

Sensex rate oil rate
Gold Correlation 1 .386 .524 .503 .260 .437
Sig. (2-tailed) .216 .081 .096 .414 .156
BSE Correlation .386 1 .472 .651* -.516 .560
Sensex Sig. (2-tailed) .216 .121 .022 .086 .058
Inflation Correlation .524 .472 1 .947** .127 .924**
Sig. (2-tailed) .081 .121 .000 .694 .000
Exchange Correlation .503 .651* .947** 1 -.082 .942**
rate Sig. (2-tailed) .096 .022 .000 .801 .000
Crude oil Correlation .260 -.516 .127 -.082 1 -.209
Sig. (2-tailed) .414 .086 .694 .801 .514
Repo rate Correlation .437 .560 .924** .942** -.209 1
Sig. (2-tailed) .156 .058 .000 .000 .514
*. Correlation is significant at the 0.05 level (2-tailed)
**. Correlation is significant at the 0.01 level (2-tailed)
(Source: Author’s calculations by using the available data in the different websites)

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The correlation matrix reveals the relationships The regression analysis shows a moderate
between economic indicators such as gold, BSE positive correlation between the dependent
Sensex, inflation, exchange rate, crude oil, and variable and the independent variables. The
repo rate. The correlations are calculated using coefficient of determination is 0.597021,
Pearson's correlation coefficient and show a indicating that 59.70% of the variance in the
moderate positive correlation between gold and dependent variable is explained by the
BSE Sensex. The correlations are strong, independent variables. The adjusted R Square is
suggesting a significant relationship between 0.261206, indicating reduced predictive power
higher inflation rates and fluctuations in when adjusting for the number of predictors. The
exchange rates. Crude oil and inflation have a standard error is 0.025596, indicating an average
weak positive correlation, while repo rate and deviation from predicted values. The ANOVA
inflation are strongly positively correlated. Repo table presents the variance analysis, with a
rate and BSE Sensex are related, though not regression sum of squares of 0.005824, residual
statistically significant. sum of squares of 0.003931, and total sum of
squares of 0.009755.
Overall, the correlation study between the
economic indicators to some interesting The model explains a moderate amount of
correlations. Notably, there are potentially variance, but this decreases when accounting for
important links in the economic landscape the number of predictors. This means that there
indicated by the substantial positive correlations may not be a strong or significant association
between inflation and exchange rate as well as between the dependent variable and the
between inflation and repo rate. independent factors.
Table 9. Multiple regression analysis of the dependent variable gold for the period of one year
(N = 12)
Particulars Coefficients Standard t Stat P-value R Adj R F Sign F
Error Square Square
Intercept 10.0202 7.8241 1.280 0.2475 0.5970 0.2612 1.7778 0.2514
SENSEX 0.6920 0.3854 1.795 0.1227
Crude Oil 0.3799 0.2014 1.886 0.1082
Inflation -1.2372 2.1177 -0.584 0.5803
ER -0.9676 1.2329 -0.784 0.4623
Repo % 0.0706 0.0542 1.301 0.2408
(Source: Author’s calculations by using the available data in the different websites)

5. RESULTS AND DISCUSSION

Table 10. Gold Pearson’s correlation with the selected variables during different research
periods
Factors Relationship with Gold Price
5 Years 3 Years Year
BSE Sensex Positive Positive Negative
Crude oil Positive Negative Negative
Inflation Positive Positive Negative
Exchange rate Positive Positive Negative
Repo rate Positive Negative Negative
(Source: Author’s calculations)

Table 11. Impact on Gold by the selected variables during different research periods
Factors Impact on Gold Price
5 Years 3 Years Year
BSE Sensex Positive Negative Negative
Crude oil Positive Negative Negative
Inflation Positive Positive Negative
Exchange rate Negative Negative Negative
Repo rate Positive Positive Negative
(Source: Author’s calculations)

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Table 10 and Table 11 summarizes the 6. CONCLUSION

correlation and impact of selected variables on
gold prices during different research periods. This study aimed to explore the various factors
Over the five-year period, the relationships that significantly impact the price of gold in India.
between selected variables and gold prices vary. The research provides important new insights
There is a mix of positive and negative into the complex dynamics of the Indian gold
correlations. BSE Sensex and crude oil prices market. First, the study identified key factors
show positive correlations, indicating that they influencing gold prices in India, such as
tend to move in the same direction as gold prices variations in the price of crude oil, shifts in the
during this period. Inflation and repo rates also BSE Sensex, exchange rates, inflation trends,
have positive correlations with gold prices. and repo rates. These factors showed complex
Exchange rates exhibit a negative correlation, relationships with gold prices, frequently
suggesting an inverse relationship with gold influenced by periods and market circumstances.
prices. During the three-year period, there is a The apparent correlation between crude oil and
noticeable shift in the relationships and impacts gold prices highlighted the close linkages
of selected variables on gold prices. BSE Sensex between these two economic commodities. As a
and crude oil prices, which had positive result of their common status as safe-haven
correlations in the five-year period, now show assets, rising oil prices have constantly been
negative correlations. This suggests a change in correlated with increasing gold prices.
their relationships with gold prices. Inflation
continues to have a positive correlation with The performance of the Indian stock market, as
gold prices, indicating a consistent measured by the BSE Sensex, showed a
relationship. Exchange rates and repo rates complex connection with gold prices. Investors
maintain their negative correlations with gold seek safety in safe-haven assets like gold during
prices. market instability or downturns, driving up the
price of this metal. Exchange rates, how
In the current year, the relationships between the strong or weak the Indian rupee is compared to
selected variables and gold prices change again. other major international currencies, have been
BSE Sensex, crude oil prices, inflation, exchange found to have a substantial impact on gold
rates, and repo rates all exhibit negative prices. Gold prices frequently rocketed because
correlations with gold prices. This suggests that import costs increased due to the rupee's
during the current year, these variables tend to decline. It was discovered that there was a
have an inverse relationship with gold prices. strong positive correlation between inflation
The most significant changes occur in the current rates and gold prices. Due to its natural
year, where all selected variables have negative significance as a safeguard against diminishing
correlations with gold prices, indicating a strong purchasing power during times of increasing
inverse relationship. The five-year period has a inflation, gold prices increased due to increased
mix of positive and negative correlations, while demand.
the three-year period shows a shift from positive
to negative correlations for BSE Sensex and They finally highlighted how fluctuations in the
crude oil prices. Inflation continues to have a repo rate set by the Reserve Bank of India affect
positive correlation with gold prices across all gold prices. As borrowing for investments
three periods. Exchange rates and repo rates became more inexpensive due to lower repo
maintain negative correlations with gold prices rates, a sign of using monetary policy, demand
consistently. for gold tended to increase, pushing prices
higher. In summary, this research offers insight
In summary, the relationships and impacts of the into the several variables affecting gold prices in
selected variables on gold prices are dynamic India. Market participants, investors,
and change over time. The current year stands governments, and financial institutions must
out with negative correlations across all know these facts. With this information, they can
variables, indicating a unique pattern compared create suitable rules, predict price fluctuations
to the longer-term trends observed in the five- more accurately, and make wise investment
year and three-year periods. Analysts and choices. Additionally, this research adds to the
investors should consider these shifts in continuing discussion about gold as an asset
relationships when making assessments about class and its importance to the Indian economy,
the potential impact of these factors on gold which may help India build a more active and
prices. open gold market.

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