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Is gold a safe haven? International evidence

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  • Baur, Dirk G.
  • McDermott, Thomas K.

Abstract

The aim of this paper is to examine the role of gold in the global financial system. We test the hypothesis that gold represents a safe haven against stocks of major emerging and developing countries. A descriptive and econometric analysis for a sample spanning a 30Â year period from 1979 to 2009 shows that gold is both a hedge and a safe haven for major European stock markets and the US but not for Australia, Canada, Japan and large emerging markets such as the BRIC countries. We also distinguish between a weak and strong form of the safe haven and argue that gold may act as a stabilizing force for the financial system by reducing losses in the face of extreme negative market shocks. Looking at specific crisis periods, we find that gold was a strong safe haven for most developed markets during the peak of the recent financial crisis.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 8 (August)
Pages: 1886-1898

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1886-1898

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Gold Safe haven Financial markets Uncertainty;

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References

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