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Gold Prices and Inflation

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  • Greg Tkacz

Abstract

Using data for 14 countries over the 1994 to 2005 period, we assess the leading indicator properties of gold at horizons ranging from 6 to 24 months. We find that gold contains significant information for future inflation for several countries, especially for those that have adopted formal inflation targets. This finding may arise from the manner in which inflation expectations are formed in these countries, which may result in more rapidly mean-reverting inflation rates. Compared to other inflation indicators for Canada, gold remains statistically significant when combined with variables such as the output gap or the growth rate of a broad monetary aggregate.

Suggested Citation

  • Greg Tkacz, 2007. "Gold Prices and Inflation," Staff Working Papers 07-35, Bank of Canada.
  • Handle: RePEc:bca:bocawp:07-35
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    Citations

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    Cited by:

    1. Blose, Laurence E., 2010. "Gold prices, cost of carry, and expected inflation," Journal of Economics and Business, Elsevier, pages 35-47.
    2. Shahbaz, Muhammad & Tahir, Mohammad Iqbal & Ali, Imran, 2013. "Is Gold Investment A Hedge against Inflation in Pakistan? A Cointegtaion and Causality Analysis in the Presence of Structural Breaks," MPRA Paper 47924, University Library of Munich, Germany, revised 01 Jul 2013.
    3. Bampinas, Georgios & Panagiotidis, Theodore, 2015. "Are gold and silver a hedge against inflation? A two century perspective," International Review of Financial Analysis, Elsevier, pages 267-276.
    4. Saira Tufail & Sadia Batool, 2013. "An Analysis of the Relationship between Inflation and Gold Prices: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, pages 1-35.
    5. Patrick Richard, 2009. "Improving the accuracy of the analytical indirect inference estimator for MA models," Economics Bulletin, AccessEcon, vol. 29(4), pages 2795-2802.
    6. Timo Mitze & Selin Özyurt, 2014. "The Spatial Dimension of Trade- and FDI-driven Productivity Growth in Chinese Provinces: A Global Cointegration Approach," Growth and Change, Wiley Blackwell, vol. 45(2), pages 263-291, June.
    7. Beckmann, Joscha & Czudaj, Robert, 2013. "Gold as an inflation hedge in a time-varying coefficient framework," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 208-222.
    8. Sharma, Susan Sunila, 2016. "Can consumer price index predict gold price returns?," Economic Modelling, Elsevier, vol. 55(C), pages 269-278.
    9. Thi Kim Cuc Nguyen & Reza Yamora Siregar, 2013. "Inflationary Implication of Gold Price in Vietnam," CAMA Working Papers 2013-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Aye, Goodness C. & Chang, Tsangyao & Gupta, Rangan, 2016. "Is gold an inflation-hedge? Evidence from an interrupted Markov-switching cointegration model," Resources Policy, Elsevier, pages 77-84.

    More about this item

    Keywords

    Inflation and prices; Exchange rates;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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