Gold and commodity prices as leading indicators of inflation: Tests of long-run relationship and predictive performance

Gold investment as an inflationary hedge: cointegration evidence with allowance for endogenous structural breaks

“…However, empirical evidence of a stable long-run relationship has been mixed, with Mahdavi and Zhou (1997: 477) summarising the early literature as follows: "These studies yielded somewhat mixed results regarding the degree of integration of the CPI and the existence of a cointegrating relationship, depending on the stationarity test and the sample period employed". Among the most recent work, Mahdavi and Zhou (1997) concluded that there was no evidence of a cointegrating relationship between gold and inflation over the period 1970-1994, while Ghosh et al (2002 were unable to establish fully either the order of integration or the presence of a cointegrating relationship.…”

“…Sherman (1986), Jaffe (1989) and Chua et al (1990), for example, have pointed out the diversification benefits for portfolios including gold investments; Ariovich (1983), Aggarwal et al (1992), Dooley et al (1995), Ghosh et al (2002) and Capie et al (2005) its efficiency as a hedge against inflation, political unrest and currency risk; and Kolluri (1981), Tschoegl (1980) Solt and Swanson (1981), Ho (1985) and Smith (2002) its market behaviour and forecastability. Koutsoyiannis (1983), Basu and Clouse (1993), Laurent (1994), Levin et al (1994), Mahdavi and Zhou (1997), Ciner (2001) and Lucey et al (2004) discuss other investment-related dimensions of this precious commodity.…”

US inflation and commodity prices: Analytical and empirical issues

“…Furlong and Ingenito (1996) signal the future direction of the economy. Mahdavi and Zhou (1997) distinguish between commodity prices and gold prices as leading indicators of inflation. Using an error-correction model they find evidence of cointegration between commodity prices and the consumer price index and also find that the evolution of the price of gold is not as important as general commodity prices.…”

Volatility Modeling and Forecasting of Istanbul Gold Exchange (IGE)

“…Cai et al (2001) examine the volatility in gold futures in the US and report GDP (gross domestic product) and CPI (consumer price index) as important factors in impelling volatility. There is also a strand of literature which discusses gold as a hedge instrument in the context of international inflation due to high oil prices and the devaluation of the US dollar against the currencies of oil producing countries (Mahdavi and Zhou, 1997;Tully and Lucey, 2007;Nakamura and Small, 2007;Hammoudeh and Yuan, 2008;Soytas et al, 2009;Sari et al, 2010;Narayan et al, 2010;Morales and Andreosso-O'Callaghan, 2011). Shafiee and Topal (2010) argue that between 1968 and 2008 there have been two jumps in oil prices, the first one in 1979-1980 and the second one in 2007-2008 which are both followed by jumps in gold prices.…”