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Abstract

Historically gold has played a vital role in the economics of many nations. Even though it is not the primary currency of investment it is still the most attractive investment option available. India has a special affinity towards gold as a sign of cultural values and secure investment. It is one of the major gold consuming nation across the globe. The gold reserve in India has been increasing year on year and reached to 607 tonnes in the year 2019, this increase in demand is also one of the contributor to determining the international gold prices. In this backdrop, the paper develops a vector error correction model to forecast the gold prices apart from explaining the influence of various determinants influencing the gold price. The key determines such as oil price, inflation and stock exchange index with 7 years data will be considered for the research. The outcome of the research will be useful to gold investor and policy making decision.

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