Introduction: Over the years, gold purchase has established itself as one of the dominant area for asset

investment and trading. Thus, for a developed commodity of trade and investment it is very important to have a relation of its price with other factors. It helps in analyzing the gold market and assists in improving the productivity of investment. With this, the fluctuation of the gold price has become a dynamic and facilitating subject for academics, investment professionals and monetary policymakers.

Statement of problem To study the effect of trend and macroeconomic variables such as central bank policies, stock market liquidity, value of dollar and state of economy on the gold price in India.

Significance of Study The performance of demand and economic factors can affect the returns on gold investment in many ways. The various economic forces can affect the gold price positively or negatively. Thus, in a way these variables become an essential part of risk factors in the gold commodity market. US dollar is inversely related to gold price. Similarly economic crisis and interest rates have a negative relationship. Demand on other hand has a positive relationship with the gold price. Hence in order to gain an understanding of the gold price fluctuation, a trend analysis needs to be done with the macroeconomic variables.

Purpose of Study There has been a lot of documentation on the linkages between the gold price and the macroeconomic variables. However, the relation between them is not well established. Hence, the purpose of the study is to fill the gaps in the relationship between the gold price and some

selected macroeconomic variables like US dollar, central bank policies, state of economy and stock market liquidity.

Methodology The relationship between the gold price and macroeconomic variables will be studied for a specific period of time. Effect of trend of over a certain period is also considered. Here, gold price will be a dependent variable and macroeconomic variables such as dollar price, central bank policies, state of economy will be independent variables. Forecasting and statistical analysis will be done to develop the price trends.

Review of Literature Gold is considered as the best medium for risk free investment along with real estate. The profit in gold investments is that it assures the easy liquidity. There are very few periods where the price of gold has been decreased drastically making it a very stable investment option.

Indias gold investment India being the worlds largest consumer of gold it is necessary to understand how much value it is bringing to the consumer. In India it is seen as a symbol of security and as a sign of prosperity. The mode of investment here is regarded as gold jewellery. It is spread across all generations and social strata within the country.

Chart from india_heart_of_gold_revival_10

1) Schemes by Indian jewelers Indian jewelers have come with various schemes to encourage systematic investment planning in gold. Tanishq pamphlet photos

2) Gold Exchange Traded Funds (ETFs) It is a commodity exchange traded fund aims to track gold price. It consists of gold backed contracts and derivatives. Indian investors are slowly moving towards these more liquid gold investments. Now even banks and financial institutions are getting ready to launch ETFs and gold schemes in India. Chart 19 pg 24

3) Indian Post Retail Programme It is project started by WGC and Reliance Money in 2008 to sell certified gold coins through its post office. This programme has extended to 700 from 100 post offices due to ongoing strong demand. 4) Gold-linked Microfinance Scheme This scheme was initiated by WGC in 2008 for effective savings instrument in the rural part of the country. Currently, the project is running in association with The Muthoot Pappachan Group under the Swarna Varsham Scheme. This scheme helps to make good quality affordable gold accessible to daily wage earners 5) Decorative and Industrial demand Approximately 22 tons of gold per annum is used in domestic and industrial applications. It is primarily driven by jari. There is also growth in the electronics manufacturing sector for microchips, connectors and contacts. Chart pg 16

Effect of gold reserves for a country Gold is considered as a money commodity. Gold reserve for a country should be more than the domestic requirement of the country as lesser value can lead to more liability. In case of fulfilling domestic demand than could lead to more expenditure of USD. That gold's role in
reserves has become more important is a direct consequence of the gloomy world economic prospects and of the liquidity problems that emerged in the mid-70s even in developed countries. GOLD PRICE CURRENCY RESERVESAuthor(s): I. NYIRIReviewed work(s):Source: Acta Oeconomica, Vol. 26, No. 1/2 (1981), pp. 123-132Published by: Akadmiai Kiad

GoldAuthor(s): B. Barret GriffithReviewed work(s):Source: The Analysts Journal, Vol. 13, No. 4 (Aug., 1957), pp. 65-66Published by: CFA InstituteStable

Monetary systems Monetary systems that rest on a gold standard are said to use gold as the ultimate standard of value. However, the classical gold standard, for most countries, held two important characteristics that distinguished it from previous monometallic monetary systems. First, it relied upon banknotes that were fully convertible into gold at a stable exchange rate. This often involved a central bank being responsible for issuing banknotes and con verting them into gold at a fixed price. Second, the gold standard allowed a relatively free movement of capital. Hence, individuals could export and import gold freely.

The Gold Standard and the Origins of the Modern International Monetary SystemAuthor(s): Samuel KnafoReviewed work(s):Source: Review of International Political Economy, Vol. 13, No. 1 (Feb., 2006), pp. 78-102Published by: Taylor & Francis, Ltd.

Great depression effects First effect of the Great Depression and the progressive withdrawal of the major countries from the Gold Exchange Standard during the early thirties, gold points stop to play a stabilizing role at the international level

Author manuscript, published in "The 16th Annual Conference of the European Society for the History of Economic Thought (ESHET), Saint Petersburg : Russian Federation (2012)" The monetary views of Paul Einzig