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The double nature of the price of gold—A quantitative analysis based on Ensemble Empirical Mode Decomposition

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  • Ming, Lei
  • Yang, Shenggang
  • Cheng, Cheng

Abstract

The research perspective of gold is either as a commodity or as a financial asset in most previous research. This paper initially examines the double nature of the price of gold both as a commodity and money from 1969 to 2014 by a statistics model, namely the Ensemble Empirical Mode Decomposition (EEMD). We decompose and categorize the gold price by time frequency into three different series: high frequency series, low frequency series and trend series, which takes 4.17%, 25.68%, 70.15% of the total variability, respectively. The high frequency series is consistent with the reaction of gold price to the influence of speculation and economic events, while the low frequency series is changing simultaneously with gold's varying role in world currency and as a safe haven asset. The trend series of gold grows steadily because of scarcity and increasing volume of jewelry purchases. Therefore, we interpret the high frequency series and trend series as a reflection of gold's commodity property, and the low frequency series is associated with gold's monetary property. This technology of EEMD sheds light on the double nature and price change of gold in the past.

Suggested Citation

  • Ming, Lei & Yang, Shenggang & Cheng, Cheng, 2016. "The double nature of the price of gold—A quantitative analysis based on Ensemble Empirical Mode Decomposition," Resources Policy, Elsevier, vol. 47(C), pages 125-131.
  • Handle: RePEc:eee:jrpoli:v:47:y:2016:i:c:p:125-131
    DOI: 10.1016/j.resourpol.2016.01.006
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    References listed on IDEAS

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    1. repec:eee:jrpoli:v:55:y:2018:i:c:p:244-252 is not listed on IDEAS
    2. He, Kaijian & Liu, Youjin & Yu, Lean & Lai, Kin Keung, 2016. "Multiscale dependence analysis and portfolio risk modeling for precious metal markets," Resources Policy, Elsevier, vol. 50(C), pages 224-233.

    More about this item

    Keywords

    Ensemble Empirical Mode Decomposition; Gold price; Dual property of gold;

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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