Abstract
his paper examines the dynamic linkage between gold price, exchange rates and stock market indices in an emerging market context, India. Consumption of gold is mostly common in household sector of India. Moreover, it can also be contemplated as an alternative investment route mainly to safeguard against financial risk obligations. The study considers 232 monthly observations of each of these variables from 1 st January 2000 to 30 th April 2019. Using Johansen Co-integration, we find a long run co-integration among gold price, exchange rate and stock market indices. The Vector Error Correction Model (VECM) shows the unilateral causality from stock market index and exchange rates to gold prices. Pairwise Granger causality exhibited bidirectional causality between exchange rate and gold prices. Our findings have important implications for financial market analysts, investors, regulators and policy makers in understanding the role of monthly stock price movement and exchange rates on gold prices in India.
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