Gold as the safest investment in time of financial crisis

This paper tests whether macroeconomic variables such as U.S. inflation, the change in the U.S. industrial production index, the return on virtually risk-free long-term Treasury bonds, the return on short-term Treasury bills and market risk premium influence the returns on gold in the past ten years. We find that U.S. inflation is a significant factor at explaining the gold returns, moreover, the rise in inflation by 1 per cent causes, on average, greater rise in the gold returns. Furthermore, neither the market risk premium nor the change in U.S. industrial production index can be considered as statistically significant factors in explaining the returns on gold. These findings fit the idea of gold being inflation hedge, zero-beta and safe haven asset in the last ten years in the USA.