Gold prices, cost of carry, and expected inflation

Blose, Laurence E.

doi:10.1016/j.jeconbus.2009.07.001

Cited by 159 publications

(92 citation statements)

References 27 publications

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“…15 Since the gold price is denominated in government currencies, its nominal value will increase if the value of this currency is eroded by inflation or other factors. 16 Furthermore, Blose (2010), using data from 1988-2008, reports that changes in expected inflation, does not appear to significantly affect the price of gold, casting doubt on the validity of this as a fundamental driver of the gold price.…”

Section: The Fundamental Valuementioning

confidence: 99%

Heterogeneous expectations in the gold market: Specification and estimation

Baur

Glover

2014

Journal of Economic Dynamics and Control

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The increase in the price of gold between 2002 and 2011 appears to be a candidate for a potential asset price 'bubble', suggesting that chartists (feedback traders) were highly active in the gold market during this period. Hence, this paper develops and tests empirically several models incorporating heterogeneous expectations of agents, specifically fundamentalists and chartists, for the gold market. The empirical results show that both agent types are important in explaining historical gold prices but that the 10-year bull run of gold in the early 2000s is consistent with the presence of agents extrapolating long-term trends. Technically this paper is a further step toward providing an empirical foundation for certain assumptions used in the heterogeneous agents literature. For example, the empirical results presented in this paper compare the economical and statistical significance of numerous switching variable specifications, that are generally only introduced ad-hoc.

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Section: The Fundamental Valuementioning

confidence: 99%

Heterogeneous expectations in the gold market: Specification and estimation

Baur

Glover

2014

Journal of Economic Dynamics and Control

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“…2 We should stress that the price of gold is also affected by some of the driving factors of the Dollar exchange rate, such as inflation expectations (see Blose, 2010) and the release of macroeconomic news (see Christie-David, Chaudhry and Koch, 2000). gold as hedging asset or safe haven typically focuses on the pattern of correlation.…”

Section: Introductionmentioning

confidence: 99%

Gold and the U.S. dollar: tales from the turmoil

Marzo

Zagaglia

2013

Quantitative Finance

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We investigate how the relation between gold prices and the U.S. Dollar has been affected by the recent turmoil in financial markets. We use spot prices of gold and spot bilateral exchange rates against the Euro and the British Pound to study the pattern of volatility spillovers. We estimate the bivariate structural GARCH models proposed by Spargoli e Zagaglia (2008) to gauge the causal relations between volatility changes in the two assets. We also apply the tests for change of co-dependence of Cappiello, Gerard and Manganelli (2005). We document the ability of gold to generate stable comovements with the Dollar exchange rate that have survived the recent phases of market disruption. Our findings also show that exogenous increases in market uncertainty have tended to produce reactions of gold prices that are more stable than those of the U.S. Dollar.

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“…Some researchers have studied the link between the dynamics of the price of gold and the inflation rate (Gosh et al, 2004;Capie et al, 2005;Blose, 2010). Other researchers have focused on the link between the dynamics of the price of gold and exchange rates (Sjaastad, 2008;Pukthuanthong and Roll, 2011;Reboredo, 2013).…”

Section: Introductionmentioning

confidence: 99%

Fluctuations of the Real Exchange Rate, Real Interest Rates, and the Dynamics of the Price of Gold in a Small Open Economy

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Economic theory predicts that, in a small open economy, the dynamics of the real price of gold should be linked to real interest rates and the rate of change of the real exchange rate. Using data for Australia, we use a real-time forecasting approach to analyze whether real interest rates and the rate of change of the real exchange rate help to forecast out-ofsample the rate of change of the real price of gold. We study the economic value-added of out-of-sample forecasts using a behavioral-finance approach that takes into account that a forecaster may have an asymmetric loss function. Terms of use: Documents in EconStor mayJEL classification: C53; E44; G02

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Gold prices, cost of carry, and expected inflation

Cited by 159 publications

References 27 publications

Heterogeneous expectations in the gold market: Specification and estimation

Heterogeneous expectations in the gold market: Specification and estimation

Gold and the U.S. dollar: tales from the turmoil

Fluctuations of the Real Exchange Rate, Real Interest Rates, and the Dynamics of the Price of Gold in a Small Open Economy

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