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Abstract
Financial markets play a decisive role in the foundation of a stable and efficient financial system of any economy. There are numerous domestic and international factors which are seen to have a direct or indirect impact on the performance of stock markets.Many researchers have also identified the long-run and short-run relationships between stock price index and gold price in developed and developing nations. This research paper also explicates that the gold prices can influence the stock market to a great extent. The investment in the gold mainly becomes appealing and radiant, when investors have to otherwise bear diminishing stock market returns in times of upset stock market conditions. Gold was one of the first metals excavated by humans. Gold has traditionally been considered as an attractive investment in India and its excellent performance in recent years has substantially confirmed the wisdom of that tradition. When markets are volatile and investors panic they tend to move out the risky assets such as stock and invest into assets such as gold. Gold like virtually all commodities is traded on a dollar dominated basis. The domestic gold price in India is continuously increasing due to its heavy demand in the country. There are several reasons gold has high demand in India. The first reason is security; gold offers full security as long as it is retained by central banks. Secondly, gold is able to maintain its liquidity even at times of crisis situations like high global inflation or political turbulence.