The Case for Gold Revisited: A Safe Haven Or A Hedge ?

Authors

  • Sudi Apak
  • Vedat Akman Beykent University
  • Serkan Çankaya
  • Sıtkı Sonmezer Beykent University

DOI:

https://doi.org/10.5195/emaj.2012.28

Abstract

This paper attempts to analyze the relation among gold prices and other macroeconomic and financial variables and addresses the question whether gold is a safe haven or a hedge for investors. The study investigates the relationship by using an econometric analysis for top gold exporter and importer countries, for a sample period of 11 years from 2000 to 2011. The results are twofold (i) return of silver, USD returns and change in the volatility index influences gold returns positively whereas, Swiss Franc and Canadian Dollar returns influence gold returns negatively regardless of presence of the 2008 crisis. (ii) In times of stress, our findings indicate that Swiss Franc, Norwegian Krone and Canadian Dollar function as haven whereas, on average, Swiss Franc, Canadian Dollar and 10 year US treasuries function as a hedge against gold but the results show no evidence for the US dollar.

 

References

Aggarwal, R. and B.M. Lucey,: Psychological barriers in gold prices? Review of Financial Economics. 16 (2), 217–230, (2007)

Baker S.A. and Van-Tassel, R.C.: Forecasting the price of gold: A fundamentalist approach. 12(4), 43-51 (1985)

Baur, DG and Lucey, BM.: Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. Financial Review. 45, 217–229, (2010)

Cai, J., Cheung, Y. -L., & Wong, M. C. S.: What moves the gold market? Journal of Futures Markets. 21(3), 257–278, (2001)

Capie, F., T. C. Mills and G. Wood.: Gold as a Hedge against the Dollar. Journal of International Financial Markets, Institutions and Money. 15(4), 343-352, (2005)

David, H., D. Paul and F. Robert.: Do Precious Metals Shine? An Investment Perspective. Financial Analysts Journal. 62(2), 98, (2006)

Koutsoyiannis, A.: A short-run pricing model for a speculative asset, tested with data from the gold bullion market. Applied Economics. 15, 563-581(1983)

Lawrence, C.: Why is Gold Different from Other Assets? An Empirical Investigation, World Gold Council, London (2003)

Levin, E.J., P. Macmillan, R.E. Wright and D. Ghosh.: Gold as an Inflation Hedge? Studies in Economics and Finance. 22(1),1-25 (2004)

Mark, Joy,: Gold and the US dollar: Hedge or haven?, Finance Research Letters. Elsevier, 8(3), 120-131, (September 2011)

Rohan Christie–David, Mukesh Chaudhryb, Timothy W. Koch.: Do macroeconomics news releases affect gold and silver prices? Journal of Economics and Business. 52(5), 405–421, (September–October 2000)

Stephan A. Baker, Roger C. van Tassel,: Forecasting the price of gold: A fundamentalist approach. Atlantic Economic Journal. 13(4), 43-51, (1985)

T. Nakamura and M. Small: Tests of the random walk hypothesis for financial data. Physica A, 377, 599-615, (2007)

Tandon, K., and T., Urich.: International Market Response to Announcements of US Macroeconomic Data. Journal of International Money and Finance. 6, (1987)

Tully, E. and B.M. Lucey,: A power GARCH examination of the gold market, Research in International Business and Finance. 21(2), 316–325, (2007)

W. Bailey.: Moneysupply announcements and the ex ante volatility of asset pricesJ. Money, Credit Banking. 20, 611–620, (1988)

World Gold Council, Gold Demand Trends 2012 Q1 report, 2012, http://www.gold.org/investment/research/regular_reports/gold_demand_trends/, Accessed 27 May 2012

Xu, X., and Fung, H.: Cross-market linkages between U.S and Japanese precious metals futures trading. International Financial Markets, 15(2), 107-124, (2005)

Zhang, Y.J. and Y.M. Wei: The Crude Oil Market and the Gold Market: Evidence for Cointegration, Causality and Price Discovery, Resources Policy. 35(3), 168-77, (2010)

Downloads

Published

2012-09-11

Issue

Vol. 2 No. 2 (2012)

Section

Articles

License

Authors who publish with this journal agree to the following terms:

  1. The Author retains copyright in the Work, where the term “Work” shall include all digital objects that may result in subsequent electronic publication or distribution.
  2. Upon acceptance of the Work, the author shall grant to the Publisher the right of first publication of the Work.
  3. The Author shall grant to the Publisher and its agents the nonexclusive perpetual right and license to publish, archive, and make accessible the Work in whole or in part in all forms of media now or hereafter known under a Creative Commons Attribution 4.0 International License or its equivalent, which, for the avoidance of doubt, allows others to copy, distribute, and transmit the Work under the following conditions:
    1. Attribution—other users must attribute the Work in the manner specified by the author as indicated on the journal Web site;
    with the understanding that the above condition can be waived with permission from the Author and that where the Work or any of its elements is in the public domain under applicable law, that status is in no way affected by the license.
  4. The Author is able to enter into separate, additional contractual arrangements for the nonexclusive distribution of the journal's published version of the Work (e.g., post it to an institutional repository or publish it in a book), as long as there is provided in the document an acknowledgement of its initial publication in this journal.
  5. Authors are permitted and encouraged to post online a prepublication manuscript (but not the Publisher’s final formatted PDF version of the Work) in institutional repositories or on their Websites prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work. Any such posting made before acceptance and publication of the Work shall be updated upon publication to include a reference to the Publisher-assigned DOI (Digital Object Identifier) and a link to the online abstract for the final published Work in the Journal.
  6. Upon Publisher’s request, the Author agrees to furnish promptly to Publisher, at the Author’s own expense, written evidence of the permissions, licenses, and consents for use of third-party material included within the Work, except as determined by Publisher to be covered by the principles of Fair Use.
  7. The Author represents and warrants that:
    1. the Work is the Author’s original work;
    2. the Author has not transferred, and will not transfer, exclusive rights in the Work to any third party;
    3. the Work is not pending review or under consideration by another publisher;
    4. the Work has not previously been published;
    5. the Work contains no misrepresentation or infringement of the Work or property of other authors or third parties; and
    6. the Work contains no libel, invasion of privacy, or other unlawful matter.
  8. The Author agrees to indemnify and hold Publisher harmless from Author’s breach of the representations and warranties contained in Paragraph 6 above, as well as any claim or proceeding relating to Publisher’s use and publication of any content contained in the Work, including third-party content.

Revised 7/16/2018. Revision Description: Removed outdated link.