Gilded Connections: Unraveling the Relationship between Gold Prices and the Indian Stock Market

Abstract

This study, "Gilded Connections: Unraveling the Relationship Between Gold Prices and the Indian Stock Market," delves into the dynamic relationship between the Nifty 50 index and Gold Futures over a 15-year period (April 2008 – June 2023). It explores whether gold functions purely as a safe-haven asset in times of stock market turbulence or if a deeper predictive link exists between these two financial indicators. Through a combination of stationarity tests, descriptive statistics, and time-series analysis techniques such as Vector Autoregression (VAR), this study uncovers key patterns in the interplay between gold price movements and Nifty 50 fluctuations. The results reveal a weak inverse correlation between the two, with Nifty exhibiting higher volatility and Gold offering stability during periods of economic uncertainty. The findings offer valuable insights into portfolio diversification, risk management, and the potential for gold to hedge against equity market risks. Overall, the study contributes to both theoretical understanding and practical applications for investors, traders, and policymakers in navigating market dynamics.