GOLD AS AN INFLATION HEDGE?

This paper attempts to reconcile an apparent contradiction between short-run and long-run movements in the price of gold. The theoretical model suggests a set of conditions under which the price of gold rises over time at the general rate of inflation and hence be an effective hedge against inflatio...

Full description

Saved in:
Bibliographic Details
Published in:Studies in economics and finance (Charlotte, N.C.) N.C.), 2004-01, Vol.22 (1), p.1-25
Main Authors: GHOSH, DIPAK, LEVIN, ERIC J., MACMILLAN, PETER, WRIGHT, ROBERT E.
Format: Article
Language:English
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper attempts to reconcile an apparent contradiction between short-run and long-run movements in the price of gold. The theoretical model suggests a set of conditions under which the price of gold rises over time at the general rate of inflation and hence be an effective hedge against inflation. The model also demonstrates that short-run changes in the gold lease rate, the real interest rate, convenience yield, default risk, the covariance of gold returns with other assets and the dollar world exchange rate can disturb this equilibrium relationship and generate short-run price volatility. Using monthly gold price data (1976-1999), and cointegration regression techniques, an empirical analysis confirms the central hypotheses of the theoretical model.
ISSN:1086-7376
1755-6791
DOI:10.1108/eb043380