Investment in Gold Futures: An Empirical Investigation in Kerala.

Abstract

The commodity market of gold opens up excellent opportunities to benefit out of the market movements without really investing in physical gold like gold stocks, gold futures, gold options, gold exchange traded funds etc. Gold futures is the most popular way of investing in non-physical gold which has recorded glittery returns. Kerala is the largest gold consuming state in India. Despite the increasing returns at increasing rate yielded by gold futures in the long run, investors in Kerala are reluctant to make even a moderate share of their investment in non-physical gold like gold futures. The forecasted future of any investment is the product of investor expectations. The investment determinants of investors play an elementary role in expounding the trend of the market. The present study is intended to investigate the relationship between the gold prices and stock market returns in India, analyze the trend and performance of gold prices in India, analyze the efficiency of gold futures in price discovery of gold in India, study the perception and attitude towards gold futures and analyze the determinants of investment in gold futures among investors in Kerala. Gold prices have been found to have a predominant bullish trend in its movements. The price of gold is forecasted to have a strong and linear growth at a uniform rate in India in upcoming years which indicates the growth in return on gold investments in the future. The role of futures in arriving these prices is not a negligible one since the unilateral causality to spot prices itself implies the domination of gold futures market in the price discovery. Though the perception of investors in Kerala towards gold futures seems to differ pre and post investment. The relationship between determinants of investment taken into consideration by investors in Kerala leads to the belief the investor may upkeep towards the investment in gold futures and ultimately market is not free from investor irrationality. Investor attitude is hence a product of multiple dimensions of gold futures market and its characteristics as well as how the same is perceived by investors