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Unemployment As A Determinant Of Gold Prices: Empirical Evidence

Author

Listed:
  • Ranjini L. Thaver
  • Jimmie Lopez

Abstract

This objective of this econometrics study is to utilize Pesaran’s (2001) Bounds Test to cointegration to study the relationship between gold prices and the US unemployment rate, using three different periods of monthly observation, Model I: 1978-2016, Model II: 1990-2016, and Model III: 2008-2016. Results reveal that there is a long run relationship between the price of gold and unemployment in Models II and III, with Model III representing the strongest and most significant relationship. During 2008-2016 the price of gold increases by 4.7% for every 1% change in the unemployment rate, ceteris paribus. The short run adjustment process however, is stronger between 1990-2016 than between 2008-2016. On the other hand, there is no observed no long run cointegrated relationship between the price of gold and unemployment during the 1978-2016 period. This direct relationship between gold price and unemployment has not been studied in the literature, so further work in this area may lead to greater insight into the impact of this macroeconomic variable on the price of gold

Suggested Citation

  • Ranjini L. Thaver & Jimmie Lopez, 2016. "Unemployment As A Determinant Of Gold Prices: Empirical Evidence," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 10(4), pages 43-52.
    • Handle: RePEc:ibf:ijbfre:v:10:y:2016:i:4:p:43-52
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    Cited by:

    1. Rana, Hafiz Muhammad Usman & O'Connor, Fergal, 2023. "Domestic macroeconomic determinants of precious metals prices in developed and emerging economies: An international analysis of the long and short run," International Review of Financial Analysis, Elsevier, vol. 89(C).

    More about this item

    Keywords

    Cointegration; Gold; Unemployment; Exchange Rate; VIX;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries

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