Applied Fin ance | Journals | Books and Articles

The IUP Journal of Applied Finance

Determinants of Gold Price in Thailand

Article Details

Pub. Date	: Jan, 2022
Product Name	: The IUP Journal of Applied Finance
Product Type	: Article
Product Code	: IJAF10122
Author Name	: Somkid Yakean
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 10

Price

Download

Abstract

Though gold plays a significant role in the financial market, monetary policy, and jewelry, pharmaceutical and electronic industries, its price is often volatile. This study aims to examine the relationship between macroeconomic variables such as exchange rate, interest rate, consumer price index, and financial indicators like the stock exchange of Thailand (SET Index) and bond index with gold prices, and investigate the factors influencing the gold prices in Thailand. This study employs dataset from May 2006 to May 2021, including 1.5 years of the Covid-19 pandemic period. The findings reveal that there is a relationship between exchange rate, interest rate, consumer price index, SET Index, and bond index with gold prices in Thailand, and this holds good during the period of Covid pandemic also. Finally, all the participants in the gold market should consider these factors before entering the market, which would assist them in achieving their investment goals.

Introduction

Gold is an asset that has numerous functions in the financial market, monetary policy, and jewelry, pharmaceutical and electronic industries. It provides the best opportunity for investors to achieve their investment objectives. It is also used as a hedging instrument to diversify the portfolio. The central bank in many countries uses gold as a reserve currency and considers it for framing the monetary policy. In the healthcare industry, it is used for medical devices like heart stents and cancer detection test, while it is used as an electronic device, like computer components, GPS, etc. Though it has many benefits, its price is volatile, and many factors influence it. Therefore, understanding the factors affecting gold prices is necessary for all the participants in the gold market, which would assist them in achieving their goals. The main concern of all the participants in the gold market is the fluctuation of gold prices, factors influencing gold prices, and the prediction of gold prices. Gold price changes over time and is determined by macroeconomic variables and financial indicators. In the past, Toramana et al. (2011), Sindhu (2013), Zakaria et al. (2015), Qiana et al. (2019), Jaraskunlanat and Kijboonchoo (2016), Sharma (2018), Thongprapai and Usawat (2018), Baber et al. (2019), and Kaewsompong and Ponlaem (2021) have examined the relationship between macroeconomic variables and financial indicators with the gold price and found that the variables like inflation rate and interest rate have a positive relationship with gold prices, while variables like inflation rate, exchange rate and financial indicators, namely, stock indices and bond indices, influence gold prices. A few researchers and scholars have investigated the bond indices that affect gold prices in the Thai gold market. Therefore, this