Abstract
Background: Commodity markets are rapidly changing across the globe due to technological and financial innovations. The introduction of commodity exchanges and futures trading has significantly affected their price discovery with ramifications for the commodity users and traders. The price discovery mechanism in commodity markets is dynamic and needs regular reassessment.
Objective: This paper aims to determine the price discovery mechanism (the relation between spot and future prices) of gold in the Indian commodity markets for the ten years between 2011-2020 and the direction of the price influence.
Materials & Methods: The current study uses daily gold price data between January 1st, 2011, and December 31st, 2020, from India's Multi Commodity Exchange (MCX). It uses a battery of econometric tools and techniques to understand the relation between the spot and future prices of gold in MCX and its causal direction
Results: The results reconfirm the influence of spot prices of gold on its futures price in the Indian commodities market, which is unidirectional from spot to the futures price.
Conclusion: The study results reconfirm the contrarian nature of gold as a commodity and an investment and reaffirm its status as a safe haven for investors.
Keywords
Gold Market, Price Discovery, VECM, Cointegration, Contrarian, Safe-haven
Recommended Citation
PK, Santosh Kumar and M A, Sanjeev
(2022)
"Examining Price Discovery in the Gold market: Evidence from India,"
Management Dynamics: Vol. 22:
No.
2, Article 4: 72-78
DOI: https://doi.org/10.57198/2583-4932.1303
Available at:
https://managementdynamics.researchcommons.org/journal/vol22/iss2/4
