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Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold

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  • Dirk G. Baur
  • Brian M. Lucey

Abstract

Is gold a hedge, defined as a security that is uncorrelated with stocks or bonds on average, or is it a safe haven, defined as a security that is uncorrelated with stocks and bonds in a market crash? We study constant and time‐varying relations between U.S., U.K. and German stock and bond returns and gold returns to investigate gold as a hedge and a safe haven. We find that gold is a hedge against stocks on average and a safe haven in extreme stock market conditions. A portfolio analysis further shows that the safe haven property is short‐lived.

Suggested Citation

  • Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:2:p:217-229
    DOI: 10.1111/j.1540-6288.2010.00244.x
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