COMMODITY MARKET INTERACTIONS: EVALUATING GOLD AND SILVER PRICE MOMENTS AND THEIR CORRELATIONS

For thousands of years, precious metals have been widely used as stores of wealth and as a means of exchange.Many investors include gold and silver in their portfolios in a variety of ways, such as jewellery, bars, coins, and exchange-traded funds.Due to their role as safe-haven assets, gold and silver become a significant investment option during times of crisis, such as turbulence in the equities market, geopolitical unrest, and a weakening US currency.A valuable precious metal, gold is extremely vulnerable to geopolitical upheavals.Following unfavourable occurrences including economic slowdowns, debt crises, changes in macroeconomic policy, and an increase in the anticipated rate of deflation, demand for gold surges.The demonetisation process in India followed a similar pattern.Gold prices are highly volatile as a result of these events, which cause abrupt price swings.Silver, as an alternative to gold, has comparable volatility.In actuality, there is a strong positive link between the prices of gold and silver.However, because a change in the price of gold and silver is not proportionate, it is challenging to establish a directional causality when looking at the correlation of changes in daily prices.Since gold was extensively kept for investment purposes, it was thought that this new tendency was caused by silver's growing significance as an industrial metal.For the same reason, the price ratio of gold to silver tends to fluctuate.Adversities like significant wars, market crises, and economic downturns have historically resulted in high levels of this ratio.Silver's price is variable because it has less market liquidity than gold and its demand vary between industrial and financial applications.The study period involves the price movements of gold commodity from January 2021 to January 2023 and it is concluded that.