This paper investigates the long run relationship and short term causal dynamic linkages between gold prices and Indian stock market index (BSE SENSEX). The daily time series data for gold prices and Mumbai stock market index BSE SENSEX are used for the period August, 2006 to May, 2014. By applying Augmented Dickey-Fuller unit root test, Johansen cointegration test and Granger causality test, the study concludes that all series are integrated of first order i.e. I(1) and there is no long run relationship between gold prices and BSE SENSEX stock market index. However, the results of Granger Causality provide evidence of short term bidirectional dynamic linkages between gold prices and BSE SENSEX. Hence, for long term Indian equity market investors there exists portfolio diversification opportunity in gold investment, particularly in stock market slump periods.