The Determinants of Gold Price in Malaysia

Abstract

The purpose of this paper is to look into the linkage between inflation rate, exchange rate, stock market return with price of gold. The sample collected for this empirical study covered 30 years of data from 1991 to 2020. The secondary data was collected annually and total 30 observations are taken for each variable. Multiple Linear Regression model is developed to find out the linkage between variables chosen with gold prices. The independent variables included Inflation rate (Consumer Price Index), exchange rate (Malaysia to USD), stock market return (FTSE Bursa Malaysia Kuala Lumpur Composite Index) and dependent variable is Price of Gold. Besides that, several tests are used including Unit Root Test (Augmented Dickey-Fuller Test), Jarque-Bera Normality Test, Breusch-Godfrey Serial Correlation LM Test, Heteroscedasticity-White Test, Ramsey Regression Equation Specification Error (RESET) Test and Granger Causality Test. The time series analysis used as the methodology by using Eview 11 to proceed all the test. The result showed that inflation rate and exchange rate have strong positive link to gold price while stock market return does not have significant relationship with gold price. In summary, this research can provide reference for other investors.