Impact of macro-economic variables on gold prices in India

Gold's appeal as an inflation hedge has been one of the primary reasons for the rise in prices in many instances in history. Gold is no doubt a preferred asset during times when investors fear sustainable inflation to erode their wealth; the reverse scenario, particularly in the presence of a strong equity market, renders gold less attractive to investors. However, the relationship between macro economic variables and gold prices has been historically unsystematic.

A historical post mortem shows how gold prices soared on the back on high inflation in the early 1980s. As inflation slowed down, gold prices did not immediately retrace to lower levels. Gold continued to be strong under the impact of opposing factors Investors who had kept away from the stock markets returned to stocks. The interest in the stock markets dried up investments in gold; however, concerns about sustainability of the lower interest rates endured investor confidence in gold's safe haven attribute eventually. The love of gold in India goes far beyond a simple source of future profits. It is an expression of wealth, financial security and family stability. It also carries religious overtones. The paper presents the brief description of macroeconomic variables and after extensive survey we arrived at a conclusion that the macro variables mentioned played major role in the economy using these variables we try to find out the relationship between gold price(as dependent variables) and macro variables (as independent variables) Macroeconomic variables used in this study are, BSE rate, dollar rate, inflation rate, crude oil and gold price a multiple regression model is employed to test for the effects of macroeconomic factors on stock.