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S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

96

Impact of Fluctuation:
Stock / Forex / Crude Oil on Gold
Vikram K. Joshi

A b s t r a c t Gold which traditionally viewed as a safe haven in uncertain times, hit record highs in post-2000. The current bull-run in gold has lasted for a decade from
` 4473.60 per 10 gms in 2000-01 to record highs of ` 14,578.08 per 10 gms in
2009-10.

B e f o r e 2 0 0 0 , t h e d e m a n d f o r g o l d w a s e l a s t i c . H o w e v e r, n o w t h e

gold market seems entirely inelastic, as the appetite for the metal is high even a s t h e p r i c e s m o v e h i g h e r. I n t h i s p a p e r t h e e f f o r t s a r e m a d e t o a n a l y z e t h e reasons for rising gold demand and prices in Indian market and its relationship w i t h t h e f o r e x m a r k e t , t h e f l u c t u a t i o n s i n t h e s t o c k m a r k e t and t h e s o a r i n g crude oil price in the international market.

Key words: Stock Market, BSE SENSEX, Gold prices, FOREX Market, Crude oil prices. dwells on the rise in price of the yellow metal.

I

Dr. Vikram K. Joshi, Asst Professor, Dr. Ambedkar
Institute of Management Studies and Research
Deekshabhoomi, Nagpur.
Email: vikramkjoshi@gmail.com

n India, gold standard was treated as one of the most important measures or instruments of monetary system. The gold standard ceased to function a long time back but gold bullion still retains some of its old halo.
Gold bullion still figures in the discussions of the monetary system. Gold bullion is prized even in the age of demat trading and plastic money, because of its inherent quality as the original currency for trading, and therefore, a symbol of financial security. Paper money has been known to become worthless in a matter of days and stocks in a matter of hours. But gold hardly loses its glitter. Since 1980s, the perception of gold has slowly changed from an asset that must be hoarded to guard against a rainy day to a commodity that can be traded. This may be one of the reasons why India is the world’s largest consumer of gold, importing around 800 tonnes annually.
As gold which traditionally is viewed as a safe heaven in uncertain times, hit record highs in post-2000. The current

A Quarterly Journal

S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

bull-run in gold has lasted for a decade from ` 4473.60 per
10 gms in 2000-01 to record highs of ` 14,578.08 per 10 gms in 2009-10 as can be seen from table 1. It is seen that, before 2000, the demand for gold was elastic, however,

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now the gold market seems entirely inelastic, as the appetite for the metal is high even as the prices move higher.
The table below shows the gold prices during 1980-81 to
2009-10 in India and London.

Table 1: Prices of Gold

Year

Spread ( in `)

Mumbai

London

Gold Prices

Gold Prices

(` per 10 gms)

(` per 10 gms)

1980-81

1522.44

1484.67

37.76

1981-82

1719.17

1209.94

509.23

1982-83

1722.54

1250.38

472.16

1983-84

1858.47

1342.06

516.41

1984-85

1983.92

1293.78

Percentage rise

690.13

during decade

1985-86

2125.47

1289.76

835.71

1986-87

2323.49

1577.02

746.46

1987-88

3082.43

1912.54

1169.89

1988-89

3175.22

1960.38

1214.84

1989-90

3229.33

2063.01

1166.32

1990-91

3451.52

2164.26

1287.26

1991-92

4297.63

2841.07

1456.55

1992-93

4103.66

3332.95

770.71

1993-94

4531.87

3766.28

765.58

1994-95

4667.24

3864.15

803.09

1995-96

4957.60

4188.58

769.03

1996-97

5070.71

4283.94

786.77

1997-98

4347.07

3775.92

571.15

1998-99

4268.00

3952.00

316.00

1999-00

4393.56

3896.66

496.90

2000-01

4473.60

4007.79

465.81

2001-02

4579.12

4260.24

318.88

2002-03

5332.36

5062.11

270.25

2003-04

5718.95

5573.53

145.41

2004-05

6145.38

5976.14

169.24

2005-06

6900.56

6790.26

9240.32

9137.79

102.53

2007-08

9995.62

9897.12

98.50

2008-09

12889.74

12816.81

72.94

2009-10

14578.08

14449.29

36.05 %

110.30

2006-07

112.11 %

231.80 %

128.79

(Till May)
Source: Compiled and Computed from Economic & Political Weekly, EPW Research

Foundation, Current Statistics, Jan 5-11, 2008, p.73 &

http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/178T_HB150909.pdf (for

A Quarterly Journal

2007 onwards data).

S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

From the table it can be seen that the prices of gold have increased by 112.11 percent during 1980-81 to 1989-90,
36.05 percent during 1989-90 to 1999-00 and again it rose sharply by 231.80 percent during 1999-00 to 2009-10. The percentage rise in gold prices during 1989-90 to 1999-00 was less as compared to the previous decade and last decade. The prices of gold plummeted sharply during 1996 to 1999 due to the following reasons. Firstly, the dollar price of gold has gone by 25 percent in the same period.
Secondly, the Indian gold import regulations have been

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liberalized and some benefits of globalization have been passed on to the consumers in the form of lower rupee prices. The higher demand for gold in India is the reason why prices of gold in India are higher as compared to the international market as can be seen from the chart above.
(Chart 1).
The following table shows the consumer demand of gold in
India and world by use during 2001 to 2009.

Table 2: Gold: Consumer Demand – India and World by Use

Year

World

India

Percentage to world total

2001 (Jan – Dec)

3370.1

702.0

20.8

2002 (Jan – Dec)

3026.4

547.3

18.1

2003 (Jan – Dec)

2848.4

568.7

20.0

2004 (Jan – Dec)

2236.0

617.7

27.6

2005 (Jan – Dec)

3098.5

721.6

23.3

2006 (Jan – Dec)

2662.0

715.5

26.9

2007 (Jan – Dec)

2810.9

769.2

27.4

2008 (Jan – Dec)

3048.2

712.6

23.4

2009 (Jan – Dec)

2423.5

480.0

19.8

Source: 1. Economic and Political Weekly, EPW Research Foundation, Current Statistics, Jan 5-11, 2008, p.73. 2. http://www.gold.org/assets/file/ pub_archive/pdf/GDT_Q4_2009.pdf (Annual Report RBI February 2010), and 3. http://www.scribd.com/doc/14037125/Gold-commodityrofile#fullscreen:on (for 2007 figures).

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S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

From the tables it can be seen that the consumption of gold in India is very high and India is largest consumer of gold in the entire world. The import of gold was 715.5 tonnes in the year 2006 and it rose to 769.2 tonnes during the year
2007 (Jan to June) i.e., rise of around 7.50 percent and was expected to reach 880 tonnes by the end of the year 2010 which represents the growth of 25.35 percent as compared to the year 2001. Also if we look at the consumption of gold in India as compared to the world consumption it is appreciably high and lies in the range of 18 percent to 27.6 percent. Thus, when one thinks of gold one think of India
– world’s largest consumer of gold.
Review of Literature
Wang M L et al (2010) have studied the relationship between the fluctuations in crude oil prices, gold price and exchange rate of US dollar with various currencies on the stock price indices of the US, Germany, Japan, Taiwan and China for the period 2006 to 2009. The results show that there exists a significant relationship between gold prices and the exchange rate. Toramana C. et al (2011), have analyzed the factors affecting gold prices in USA for the period 1992 to
2010. The factors considered for the study are Oil prices,
USA exchange rate, USA inflation rate and USA real interest rates. They have found highest negative correlation between gold prices and oil prices in USA. Also the study proved that there exists a high degree of correlation between gold prices and USA dollar. The other variables have no significant relationship with the gold prices. Kalra N. et al
(2012), has carried out the research to study for the period
2008 to 2011 to analyze the impact of various global and domestic factors on the Indian stock market. They have shown that there exists a positive and significant relationship of gold prices with BSE SENSEX.
In Indian context, the rally in gold prices were triggered by the global trend which normally sets prices in domestic bullion markets, is closely linked with the forex market and moves in the opposite direction of the US dollar.
Secondly, the soaring crude oil price is another factor which pushes demands and prices of gold. Thirdly, the fluctuation in the stock market, which causes economic uncertainty, favours the investment demand of gold. In this paper the impact of BSE SENSEX, FOREX and crude oil prices on movement of prices of gold in India are analyzed through an econometric enquiry.

99

Data Collection
The data are collected for the fluctuations in the BSE
SENSEX, gold prices and value of Rupees/Dollar during
30 th January 2008 to 14 th March 2008 and 3 rd June 2010 to
4 th August 2010. The above period is selected to study the relationship between the SENSEX, gold prices and the value of Rupees/Dollar as the SENSEX was relatively volatile and the value of Rupees/Dollar was relatively stable during the first period and the SENSEX was relatively stable and the value of Rupees/Dollar was relatively volatile during the second period. From the table 3 and chart 2, it can be seen that when SENSEX falls gold price increases and vice versa, but it is not true always. Whenever there are high fluctuations in the market, people prefer to make investment in gold and seasonal demand is the another factor. Also when the value of Rupees/Dollar appreciates demand for gold increases and vice versa as can be seen from chart 3. When dollar depreciates in value in international market, demand for gold increases in our country. Thus, it seems that there exists an inverse relationship between value of dollar and gold prices (and also demand) in India. Finally, the soaring crude oil price in international market increases the demand and price of gold in the country. This is evident from the fact that soaring crude oil prices and falling dollar pushed gold to an all-time high of Rs. 13,030 on March 14, 2008. This paper analyses these facts with the help of an econometric enquiry about whether these facts hold true statistically or are mere coincidences at different occasions.
Let us consider the following tables showing the comparison between BSE SENSEX, Gold prices and Value of Rupees/Dollar during 30 th Jan to 14 th Mar 2008 and 3 rd
June to 4 th August 2010 and the comparison between BSE
SENSEX, Gold prices, Value of Rupees/Dollar and Crude
Oil Prices during the same period (Table 3 and Table 4).
As seen in Chart 2 and Chart 4, when SENSEX – Relatively volatile; Value of Rupees/Dollar – relatively stable and
Crude Oil Prices – relatively volatile, the trend lines of
SENSEX and gold prices are going in opposite direction which shows an inverse relationship between SENSEX and gold prices. If we compare the trend lines of gold prices and value of Rupees/Dollar, the trend lines go in the same direction which show that there exists a direct relationship between gold prices and value of Rupees/dollar. Also, the

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S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

100

Table 3: Comparison between BSE SENSEX, Gold prices and Value of `/Dollar during
30 th Jan to 14 th Mar 2008 and 3 rd June to 4 th August 2010

Part (a)

Part (b)

Sensex – Relatively Volatile

Sensex – Relatively Stable

Value of `/Dollar – Relatively Stable

Value of `/Dollar – Relatively volatile

Day

BSE

Gold

Sensex

Value

price/

of Rs/

10 gms

BSE

dollar

Day

Sensex

Gold

Value

price/

of Rs/

10 gms

dollar

30 Jan, 08

17,759

11,785

39.39

3 June, 10

16,742

18,725

46.99

31 Jan, 08

17,649

11,785

39.37

8 June, ‘10

16,781

18,645

47.10

1 Feb, 08

18,233

11,890

39.36

9 June, ‘10

16,617

19,050

46.95

4 Feb, 08

18,660

11,515

39.44

11 June, ‘10

16,922

18,725

46.97

5 Feb, 08

18,663

11,405

39.55

12 June, ‘10

17,065

18,640

46.85

6 Feb, 08

18,139

11,470

39.50

15 June, ‘10

17,338

18,615

46.49

7 Feb, 08

17,527

11,630

39.53

16 June, ‘10

17,413

18,580

46.57

8 Feb, 08

17,465

11,710

39.63

18 June, ‘10

17,617

18,690

46.32

11 Feb, 08

16,631

11,895

39.69

19 June, ‘10

17,571

18,790

46.17

12 Feb, 08

16,608

11,835

39.69

22 June, ‘10

17,877

18,790

45.75

13 Feb, 08

16,949

11,620

39.75

23 June, ‘10

17,750

18,615

46.25

14 Feb, 08

17,766

11,685

39.60

24 June, ‘10

17,756

18,735

46.19

15 Feb, 08

18,115

11,788

39.67

25 June, ‘10

17,730

18,665

46.49

18 Feb, 08

18,048

11,650

39.78

26 June, ‘10

17,575

18,820

46.29

19 Feb, 08

18,076

11,650

39.93

29 June, ‘10

17,774

18,895

46.21

20 Feb, 08

17,613

12,005

40.20

30 June, ‘10

17,534

18,770

46.49

21 Feb, 08

17,735

12,200

39.92

1 July, ‘10

17,701

18,830

46.45

22 Feb, 08

17,349

12,230

40.03

3 July, ‘10

17,461

18,465

46.77

25 Feb, 08

17,651

12,265

39.96

7 July, ‘10

17,614

18,495

46.91

26 Feb, 08

17,806

12,055

39.90

8 July, ‘10

17,471

18,290

47.04

27 Feb, 08

17,826

12,345

39.78

13 July, ‘10

17,937

18,390

46.78

28 Feb, 08

17,824

12,325

39.87

14 July, ‘10

17,986

18,410

46.77

29 Feb, 08

17,578

12,520

40.01

15 July, ‘10

17,938

18,460

46.70

3 Mar, 08

16,678

12,745

40.14

17 July, ‘10

17,956

18,395

46.77

4 Mar, 08

16,340

12,805

40.31

20 July, ‘10

17,928

18,290

47.13

5 Mar, 08

16,542

12,585

40.29

21 July, ‘10

17,878

18,220

47.36

7 Mar, 08

15,976

12,855

40.52

27 July, ‘10

18,020

18,245

47.05

10 Mar, 08

15,924

12,740

40.50

28 July, ‘10

18,078

18,065

46.68

11 Mar, 08

16,123

12,845

40.45

29 July, ‘10

17,957

17,765

46.77

12 Mar, 08

16,128

12,725

40.33

30 July, ‘10

17,992

17,445

46.54

13 Mar, 08

15,357

12,965

40.44

3 Aug, ‘10

18,081

17,810

46.25

14 Mar, 08

15,761

13,030

40.44

4 Aug, ‘10

18,115

17,905

46.17

Source: Market Watch, Times of India, Jan 30 to March 14, 2008 & June 3 to August 4, 2010.

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S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

101

Table 4: Comparison between BSE SENSEX, Gold prices, Value of `Dollar and Crude Oil Prices
Part (a) :Sensex – Relatively Volatile; Value of `/Dollar – Relatively Stable; Crude Oil Prices – Relatively Volatile
Day

BSE Sensex

Gold Price/10 gms

Value of

Crude Oil

`/dollar

Prices ($)

1 Feb, 08

18,233

11,890

39.36

88.96

8 Feb, 08

17,465

11,710

39.63

91.77

15 Feb, 08

18,115

11,788

39.67

95.50

22 Feb, 08

17,349

12,230

40.03

98.81

29 Feb, 08

17,578

12,520

40.01

101.84

7 Mar, 08

15,976

12,855

40.52

105.15

14 Mar, 08

15,761

13,030

40.44

110.21

Part (b):Sensex – Relatively Stable; Value of `/Dollar – Relatively Volatile; Crude Oil Prices – Relatively Stable
Day

BSE Sensex

Gold price/10 gms

Value of

Crude Oil

Rs/dollar

Prices ($)

3 June, 10

16,742

18,725

46.99

71.51

11 June, 10

16,922

18,725

46.97

73.78

18 June, ‘10

17,617

18,690

46.32

77.18

25 June, ‘10

17,730

18,665

46.49

78.86

1 July, ‘10

17,701

18,830

46.45

72.14

8 July, ‘10

17,471

18,290

47.04

76.09

15 July, ‘10

17,938

18,460

46.70

76.01

21 July, ‘10

17,878

18,220

47.36

78.89

` /dollar

Source: http://www.nyse.tv/crude-oil-price-history.htm & Table 5 above.

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102

` /dollar

` /dollar

S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

A Quarterly Journal

103

` /dollar

S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

trend lines of gold prices and crude oil prices as seen in chart
4 goes in the same direction, implies that there exists a direct relationship between gold prices and crude oil prices.
Similarly, as seen in Chart 3 and Chart 5, when SENSEX –
Relatively stable; Value of Rupees/Dollar – relatively volatile and Crude Oil Prices – relatively stable, the trend lines of SENSEX and gold prices are going in opposite direction which show an inverse relationship between
SENSEX and gold prices. If we compare the trend lines of gold prices and value of Rupees/Dollar, here the trend lines go in the opposite direction (chart 3) which shows that there exists an inverse relationship between gold prices and value of Rupees/Dollar when value of Rupees/Dollar is volatile. Also, the trend lines of gold prices and crude oil prices as seen in chart 5 goes in the opposite direction, implies that there exists an inverse relationship between gold prices and crude oil prices when crude oil prices are relatively stable.
For analyzing the impact of the various variables on gold prices, the hypotheses are formulated for different occasions as mentioned in the various cases as discussed below: Data Analysis
Case 1: When SENSEX – Relatively volatile
H 0 : There is no relationship between gold prices and
SENSEX.
H 1 : There exists a relationship between gold prices and
SENSEX.
The output generated for the regression equation between gold prices and BSE Sensex when Sensex is relatively volatile using Analyse-it tool-pack of EXCEL, is given as below: As seen in table 5, the slope coefficient of regression equation indicates that as BSE Sensex increases by 1 unit, gold price decreases by 0.4543 units. Since Sensex is an index measured in 100s, the coefficient of Sensex implies that gold price decreases by ` 45.43 for every 100 extra
BSE Sensex rise. Similarly, when Sensex = 0, the price of gold is determined at `19,986. Secondly, the value of adj
R 2 comes to be 0.63 and R 2 comes to be 0.64 which is moderately high. Thus, we can conclude that the

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S C M S J o u r n a l o f I n d i a n M a n a g e m e n t , October - December, 2 0 1 2.

104

Table 5: Regression Analysis - Gold Price vs SENSEX n R

32
2

0.64

Adjusted R 2

0.63

SE

304.7

Term

Coefficient

95% CI

SE

Intercept
Slope

19986

17811 to 22160

1065

-0.4543

-0.5801 to -0.3285 0.06159

t statistic

DF

p

18.77

30

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...Case Study: Trip Seven Screen Printing Carolina Barvo Vilaro, Professor Terrell Jones Purchasing Management TRA3132 Florida State College at Jacksonville ABSTRACT This paper has the purpose to analyze the case study of Trip Seven Screen Printing. Through this paper I will discusses viable solutions for the problem that arise with the current supplier of Trip Seven Screen Printing. INTRODUCTION Being in constantly communication with suppliers, meet with the payments and be transparent in what both parties need at the time of generating an order, it will allow supplier to deliver a quality product or service, and achieve the expectations of the customer. It is important to build a good relationships with suppliers. It is a characteristic that e companies should take in consideration to succeed in the market. This will allow them to get good results for their business, improve the quality of the inputs and achieve future agreements which are beneficial for the company. Proper coordination with vendors allows companies to produce a better final product or service, which will generate greater customer satisfaction and, therefore, higher sales for the business. The good relationship becomes more crucial in the case of companies that rely on a provider in specific. This can be related to the case study in which Trip Seven Screen Printing has as a unique supplier, American Apparel, even though their relation has been satisfactory for the past years, recently, issues...

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