Due to its security and high demand, gold is the most sacred metal among Sri Lankans. Gold is considered an alternative means of investing. Gold is frequently cited as the best option for long-term purchasing power preservation. Additionally, gold investments can be used as a hedge against currency depreciation and inflation. Due to economic vulnerability, investors are therefore interested in investing in gold. Gold price fluctuations are significant and interesting from an economic and financial perspective. It is indisputable that the price of gold remains relatively constant at all times and exhibits little variation in response to the volatility of the economy and financial situation. Inflation, crude oil prices, the exchange rate, and other factors all have an impact on gold's price. But inflation significantly affects gold prices. The volatility of inflation is managed by gold prices. As a result, a thorough comprehension of the connection between inflation and gold prices is necessary. The study's ultimate goal is to investigate the connection between inflation and gold price. The gold price, which is measured in Sri Lankan rupees per troy ounce, is the dependent variable, while inflation, which is measured in the wholesale price index, is the independent variable. The study used 240 monthly observations from January 1999 to December 2018. Data can be analyzed using the unit root test, correlation analysis, ordinary least square regression analysis, Granger causality test, and normality test. There is a strong and positive correlation between inflation and the price of gold, according to the empirical findings. The regression analysis showed that inflation has a big effect on the price of gold. Inflation and gold prices were found to be inversely correlated.
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