Relationship between the gold and silver markets in India

Jobin Scaria

A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. This study shows the "Performance Analysis of Indian gold and silver Commodity derivative Market" and this analysis made through the study of cointegration in gold and silver commodity market, then the long-term relationship between gold and silver market and price discovery in gold and silver commodity derivative market. The study is made using data taken from MCX website for the last five years and these spot and future prices considered here. The study suggests that There is no long-term relationship between future prices and spot prices of Gold and Silver so there is no cointegration or association between them in long run. In this case for an investor this Gold and Silver are good investment avenues in the long run. Both Gold and Silver has no relationship in the long run so by investing in these commodities the investor can diversify the risk and it's a diversified portfolio.