Gold prices, cost of carry, and expected inflation
How do changes in expected inflation affect gold prices? Using unexpected changes in the Consumer Price Index (CPI) this paper shows that surprises in the CPI do not affect gold spot prices. The results indicate that investors anticipating changes in inflation expectations should design speculation strategies in the bond markets rather than the gold markets. Additionally, investors cannot determine market inflation expectations by examining the price of gold.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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, 05.
- Dirk G. Baur & Brian M. Lucey, 2007. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Institute for International Integration Studies Discussion Paper Series iiisdp198, IIIS.
- Greg Tkacz, 2007. "Gold Prices and Inflation," Staff Working Papers 07-35, Bank of Canada.
- Wayne D. Angell, 1992. "Commodity Prices and Monetary Policy: What Have We Learned?," Cato Journal, Cato Journal, Cato Institute, vol. 12(1), pages 185-192, Spring/Su.
- Dipak Ghosh & Eric J. Levin & Peter Macmillan & Robert E. Wright, 2000.
"Gold as an Inflation Hedge?,"
Discussion Paper Series, Department of Economics
200021, Department of Economics, University of St. Andrews.
- Stephen G. Cecchetti & Rita S. Chu & Charles Steindel, 2000. "The unreliability of inflation indicators," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 6(Apr).
- Joseph G. Haubrich, 1998. "Gold prices," Economic Commentary, Federal Reserve Bank of Cleveland, issue Mar.
- Andrew C. Worthington & Mosayeb Pahlavani, 2007. "Gold investment as an inflationary hedge: cointegration evidence with allowance for endogenous structural breaks," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(4), pages 259-262.
- Blose, Laurence E., 1996. "Gold price risk and the returns on gold mutual funds," Journal of Economics and Business, Elsevier, vol. 48(5), pages 499-513, December.
- T. Clifton Green, 2004. "Economic News and the Impact of Trading on Bond Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1201-1234, 06.
- Blose, Laurence E. & Shieh, Joseph C. P., 1995. "The impact of gold price on the value of gold mining stock," Review of Financial Economics, Elsevier, vol. 4(2), pages 125-139.
- Larsen, Alan B & McQueen, Grant R, 1995. "REITs, Real Estate, and Inflation: Lessons from the Gold Market," The Journal of Real Estate Finance and Economics, Springer, vol. 10(3), pages 285-297, May.
- Gerald P. Dwyer & R. W. Hafer, 1989. "Interest rates and economic announcements," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 34-46.
- Thomas Urich & Paul Wachtel, 1984. "The Effects of Inflation and Money Supply Announcements on Interest Rates," NBER Working Papers 1313, National Bureau of Economic Research, Inc.
- Urich, Thomas J & Wachtel, Paul, 1984. " The Effects of Inflation and Money Supply Announcements on Interest Rates," Journal of Finance, American Finance Association, vol. 39(4), pages 1177-1188, September.
- Smirlock, Michael, 1986. "Inflation Announcements and Financial Market Reaction: Evidence from the Long-term Bond Market," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 329-333, May.
- Tschoegl, Adrian E., 1980. "Efficiency in the gold market -- a note," Journal of Banking & Finance, Elsevier, vol. 4(4), pages 371-379, December.
- Tully, Edel & Lucey, Brian M., 2007. "A power GARCH examination of the gold market," Research in International Business and Finance, Elsevier, vol. 21(2), pages 316-325, June.
- Mahdavi, Saeid & Zhou, Su, 1997. "Gold and commodity prices as leading indicators of inflation: Tests of long-run relationship and predictive performance," Journal of Economics and Business, Elsevier, vol. 49(5), pages 475-489.
- Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December.
- C. Alan Garner, 1995. "How useful are leading indicators of inflation?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-18.
- Christie-David, Rohan & Chaudhry, Mukesh & Koch, Timothy W., 2000. "Do macroeconomics news releases affect gold and silver prices?," Journal of Economics and Business, Elsevier, vol. 52(5), pages 405-421.
- David Veredas, 2006. "Macroeconomic surprises and short-term behaviour in bond futures," Empirical Economics, Springer, vol. 30(4), pages 843-866, January.
- Michael Smirlock, 1986. "Inflation announcements and financial market reaction: evidence from the long-term bond market," Working Papers 86-6, Federal Reserve Bank of Philadelphia.
- Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October.
When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:62:y:2010:i:1:p:35-47. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.