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Gold Price Dynamics and the Role of Uncertainty

Author

Listed:
  • Joscha Beckmann

    (University of Duisburg-Essen, Department of Economics, Chair for Macroeconomics)

  • Theo Berger

    (University of Bremen, Department of Business Administration, Chair for Applied Statistics and Empirical Economy)

  • Robert Czudaj

    (Chemnitz University of Technology, Department of Economics, Chair for Empirical Economics)

Abstract

This study adopts a copula wavelet approach to analyze dynamics of the gold price against bonds, stocks and exchange rates based on disaggregation of the underlying relationships across different frequencies. We also examine whether gold prices are directly affected by changes in uncertainty. Analyzing data for nine economies for a sample period starting in 1985, we find that the role of gold changes significantly after the collapse of Lehman Brothers in 2008. Gold is unable to serve as a hedge in the classical sense while the findings for the period prior to 2008 mostly suggest that gold is able to shield investors. Uncertainty measures display a surprising and time-varying relationship with the path of the gold price. While economic policy uncertainty is positively correlated with gold price developments, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold.

Suggested Citation

  • Joscha Beckmann & Theo Berger & Robert Czudaj, 2017. "Gold Price Dynamics and the Role of Uncertainty," Chemnitz Economic Papers 006, Department of Economics, Chemnitz University of Technology, revised May 2017.
    • Handle: RePEc:tch:wpaper:cep006
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bonds; exchange rates; gold; hedge; safe haven; stocks; uncertainty;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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