Investor’s Perspectives on Gold and Silver Investment in India

Gold and silver are considered precious metals not only because of their beautiful presentation but also because they would serve a role as investments. Thus, understanding how well they form part of investment portfolios and their capacity for hedging is critical. This study seeks to evaluate the investment prospects of gold and silver with respect to their functionality as hedging instruments against inflation and market volatility in the Indian market. We analysed the time-varying correlation between the Nifty index, inflation, gold, and silver using the GARCH-DCC framework, considering market volatility during the 2008 financial crisis and the COVID-19 pandemic. This study addresses the gap in the existing literature by analysing the role of gold and silver as hedging instruments in the Indian financial market over a comprehensive period from 2003 to 2023. Findings reveal that there is indeed a statistically significant positive correlation between silver and inflation, making silver an excellent hedge against inflation- albeit likely better than gold. During the financial crisis, gold’s correlation was a significant negative to the Nifty index- in other words, gold served as a strong hedge against declines in the stock market. The research focuses on the importance of gold as an asset in the financial market downturn, which was evidenced by its performance during the crisis of 2008. These findings will have practical implications in terms of hedging strategies and portfolio management within the ambit of the Indian financial market.