Abstract
Gold is most sacred metal among Sri Lankans due to it security and high demand. Gold is treated as an alternative investment avenue. It is often stated that gold is the best preserving purchasing power in the long run. Gold investment can also be used as a hedge against inflation and currency depreciation. Therefore, investors are showing interest in investing in the gold due to economic vulnerability. From an economic and financial point of view, movements in the price of gold are both interesting and important. It cannot be denied that gold price is stable all the time and has minimal fluctuation for economic volatility and financial condition. The price of gold is affected by various factors like inflation, crude oil, exchange rate etc. But gold prices are fluctuated by inflation significantly. Gold prices control the inflation instability. Therefore, deep understanding of the relationship between inflation and gold price is prerequisite. The ultimate objective of the study is to explore the relationship between inflation and gold price. The dependent variable is gold price which is measured by Sri Lanka rupee per Troy ounce meanwhile the independent variable is inflation which is measured by wholesale price index. 240 monthly observations from January 1999 to December 2018 were used in the study. Unit root test, correlation analysis, ordinary least square regression analysis, granger causality test and normality tests are employed for analysing data. The empirical results have found strong and positive correlation between inflation and gold price. The results of regression analysis revealed that inflation significantly impacts on gold price. Unidirectional relationship was found between gold price and inflation.
Highlights
1.1 Background of the StudyGold price is one factor that represents the economic wealth of a country
Blose (2010) examined on the gold prices, cost of carry, and expected inflation by employing unexpected changes in the consumer price index (CPI) and the results indicated that CPI does not affect gold spot prices
The results indicated that the gold prices Granger-causes stock market returns and stock market returns Granger-causes the gold prices in India during the sample period
Summary
Gold price is one factor that represents the economic wealth of a country. It is the most leading indicators of the economic development. There is a surge in jewellery demand among Sri Lankans traditionally, especially among Sri Lankan Tamils during wedding seasons that is from July to September This trend often leads to increase in gold prices. The price of gold is affected by various economic factors. Inflation is the rise in prices of goods and services It affects the purchasing power of people in the country. Various studies have attempted to figure out the association between gold price and Inflation. Various studies have attempted to figure out the association between gold price and Inflation. Tufail and Batool, (2013) have proved that gold prices can significantly impact on the inflation
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Accounting and Financial Reporting
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
