The Impact of Macroeconomic Factors on Gold Prices

The Impact of Macroeconomic Factors on Gold Prices

Dr. Kiran Kumar M, Nisha Palaniappan, Ruma Sultana, Meghana Krishnamurthy.

Assistant Professor, MBA Student- Finance, MBA Student- Finance, MBA Student- Finance.

Kiranm287@gmail.com, nisha_palaniappan23@cms.ac.in, ruma_sultana23@cms.ac.in, meghana_k23@cms.ac.in.

Faculty of Management Studies, CMS B School, Jain (Deemed-to-be university), Bangalore

Abstract:

This study analyzes the influence of significant macroeconomic variables, like interest rates, inflation, GDP growth rates, and currency rates, on gold prices. Analysis of a 20-year dataset from 2003 to 2023, employing descriptive statistics and regression techniques, demonstrates substantial connections between these variables and changes in gold prices. The results show that inflation and exchange rates have a positive relationship with gold prices, while GDP growth rate has a modest inverse relationship. Interest rates exhibit a weak inverse relationship, although it is not statistically significant. The model explains approximately 93% of the variation in gold prices, underscoring the complex interplay between macroeconomic factors and gold price movements. The results are significant for investors aiming to mitigate inflation or economic instability, as well as for policymakers evaluating the effects of monetary policy on gold demand. This research contributes to the understanding of gold's role in the global financial system and highlights areas for future investigation, including the incorporation of additional factors and advanced modelling techniques.

Keywords: Gold prices, Macroeconomic factors, GDP growth rate, Interest rates, Inflation, Exchange rates, Regression analysis.