Investment in Gold : Trends and Analysis of Indian Stock Market

With the augmentations in financial instruments and investment alternatives, the role, usage and scope of commodity gold has seen a paradigm shift. From the raw material for making statutes, icons and jewelry to adorn human bodies gold has now emerged as a hedge against risk in volatile markets. This paper attempts to examine the concept of gold trading in India, to highlight the significance of gold trading in the context of Indian stock market and to analyse the trend of nominal gold prices in Indian stock market. Further it undertakes to examine the performance of gold and nifty after adjustment for inflation and to check whether the inclusion of gold in an optimal portfolio improves its performance or not. With the use of three weeks moving averages, graphical analysis and Sharpe's portfolio optimization model bullish trend in gold prices has been observed over the past eight years which supports the fact that inflation adjusted performance of gold is better than the inflation adjusted performance of nifty. In addition, it also proves that inclusion of gold in optimal portfolio improves the performance