Determinants of gold prices in Pakistan

Abstract

Gold has been valued as the most excellent used expensive metal not only due to its usage in ornaments; Gold is well thought-out one of the most valuable metals in the world. The relationship of gold prices with many variables is well discussed in this research study. In this research paper we have to look into the empirical studies and theoretical frame work to identify the explanatory variables that have significant effect on the gold prices. We are including the rate of inflation in the pricing model as gold is considered to be a hedge against inflation. This paper has quoted few studies that relate stock prices and gold prices for the U.S., Australia and India. In this research paper the price of gold is defined as a function of inflation, Interest rate, Exchange Rate of US Dollar with Pakistani Rupee, Stock Market Performance, price of silver, per capita income and domestic savings. The reason for holding gold is guided by the individual sentiments. Like other developed countries, investment in stock market is not very common in Pakistan. Most of the people consider gold as the safe investment as the price of gold continues to increase. © Springer-Verlag Berlin Heidelberg 2014.