Impact of Dollar Fluctuation on Gold and Crude Oil Prices

Abstract

The a₹/$ rate is very important for the movement of prices of Gold and Crude oil. The a ₹/$ rate is considered as a base by the commodity traders to forecast the Gold or Crude oil movement. This gives a strong subjective background to test the existence of any such relationship in India. This paper focuses on to establish and validate the long-term relationship of commodities' prices (Gold and Crude Oil) with Exchange rate (a₹/$.) in the Indian context. There are numerous traders in India who trade in commodities because of relationship of a₹/$ exchange rate and Commodity price. There are many other factors on which the prices of Gold and crude oil may depend. They are government policies budget, inflation, economic and political condition of the country etc. affect the prices of Gold and Crude oil. But this study focuses only on one independent variable i.e. a ₹/$ exchange rate. The data of a₹/$/$ weekly closing rate taken as an independent variable and the prices of Gold and Crude oil are taken as dependent variables. The correlation-regression analysis and ADF test is used to find out relationship among a₹/$ exchange rate volatility v/s Gold and Crude oil. The a₹/$ exchange rate found stationary with the help of ADF test. The study shows the negative relationship between a/$ exchange rate and Gold and Crude oil.