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Gold as inflation and exchange rate hedge: The case of India

Author

Listed:
  • Amrendra Kumar

    (Head of Risk Management, Statkraft Markets Private Limited)

  • Vikash Gautam

    (Jawaharlal Nehru University)

Abstract

For a long part of the recorded past, gold has served as the basis of the monetary system and therefore, it was a prominent choice as currency risk hedge. In recent years several alternatives of gold have emerged. The use of gold vis-Ã -vis other alternatives, in hedging against currency risk, depends on whether gold occupies a considerable position in the hedging portfolio. We use monthly observations on gold prices, inflation and exchange rate from April 1993 to June 2016 to test this hypothesis. The results show that gold is an effective hedge only against the unexpected part of the exchange rate, although it is not so completely.

Suggested Citation

  • Amrendra Kumar & Vikash Gautam, 2017. "Gold as inflation and exchange rate hedge: The case of India," Economics Bulletin, AccessEcon, vol. 37(2), pages 1168-1175.
    • Handle: RePEc:ebl:ecbull:eb-16-00692
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    References listed on IDEAS

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    Cited by:

    1. Wang, Kuan-Min & Lee, Yuan-Ming, 2022. "Is gold a safe haven for exchange rate risks? An empirical study of major currency countries," Journal of Multinational Financial Management, Elsevier, vol. 63(C).

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