Impact of Commodities Trading on Exchange: Case of Gold

The introduction of commodities trading on exchange in India in 2002–03 was a major benchmark in the economic history of the country. Trading of any commodity leads to increase in its artificial demand. The case stands true for gold as well. The present study is an attempt to understand how introduction of trading in gold has impacted the prices, demand and the safe haven property of the yellow metal. The paper adopts the use of secondary data for the study. Relevant data is collected from various secondary sources and a comparative analysis is done for prices of gold pre and post trading of gold on the exchange. The paper concludes that the gold prices have shown exponential growth since the introduction of gold trading on the exchange but there has not been a proportional impact of consumption demand of gold. The metal is also not as better as a hedge against the fluctuations of capital market as it was prior to listing on exchange. However, the major limitation of the study is that it does not take into consideration other factors impacting gold prices.