Gold as an inflation hedge?

Dipak Ghosh, Eric J. Levin, Peter MacMillan, Robert E. Wright

Research output: Contribution to journalArticle

82 Citations (Scopus)

Abstract

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.
LanguageEnglish
Pages1-25
Number of pages25
JournalStudies in Economics and Finance
Volume22
Issue number1
DOIs
Publication statusPublished - 2004

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Hedge
Inflation
Short-run
Price volatility
Empirical analysis
Assets
Exchange rates
Default risk
Cointegration
Gold price
Convenience yield
Lease

Keywords

  • inflation
  • gold
  • economics
  • finance
  • pricing

Cite this

Ghosh, D., Levin, E. J., MacMillan, P., & Wright, R. E. (2004). Gold as an inflation hedge? Studies in Economics and Finance, 22(1), 1-25. https://doi.org/10.1108/eb043380
Ghosh, Dipak ; Levin, Eric J. ; MacMillan, Peter ; Wright, Robert E. / Gold as an inflation hedge?. In: Studies in Economics and Finance. 2004 ; Vol. 22, No. 1. pp. 1-25.
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Ghosh, D, Levin, EJ, MacMillan, P & Wright, RE 2004, 'Gold as an inflation hedge?' Studies in Economics and Finance, vol. 22, no. 1, pp. 1-25. https://doi.org/10.1108/eb043380

Gold as an inflation hedge? / Ghosh, Dipak; Levin, Eric J.; MacMillan, Peter; Wright, Robert E.

In: Studies in Economics and Finance, Vol. 22, No. 1, 2004, p. 1-25.

Research output: Contribution to journalArticle

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Ghosh D, Levin EJ, MacMillan P, Wright RE. Gold as an inflation hedge? Studies in Economics and Finance. 2004;22(1):1-25. https://doi.org/10.1108/eb043380