Vol. 3, Issue 8, Part L (2017)

Abstract
The current paper explores the causality between the movement of gold prices and the stock market indices. Both gold and stock are considered as good avenues of investment and to diversify one’s portfolio. The ADF Unit test, Granger causality test, and Johnson co-integration test have been conducted on monthly data from 2001 to 2017. The results show the absence of an association between the price of gold and Sensex in the long-run. Furthermore, there is a very weak causal effect of the stock market prices on the gold prices. The findings of the study do not reveal the existence of any link between gold prices and the Sensex. As a result, gold can be included in the portfolio as a means of diversification.