Is Gold a Hedge or a Safe Haven? an Analysis of Stocks, Bonds and Gold

Hedging capabilities of bitcoin. Is it the virtual gold?

“…Thereby the return on bitcoin is not affected by changes in the stock market which creates a possibility for investors to hedge some of the market risk. The result is similar to the ones found for gold by Baur and Lucey (2010) indicating that bitcoin and gold have similar hedging capabilities in the UK market. Investors in the United Kingdom can thereby use gold as well as bitcoin to counteract specific market risk as bitcoin is uncorrelated with the 100 largest companies by market capitalization listed on the London stock exchange and the return on gold is negatively correlated with the return on stocks and bonds in the UK market.…”

“…The output of the Threshold GARCH model inspired by Baur and Lucey (2010) is shown in Table 2. The sign and significance of the contemporaneous effect suggests that bitcoin is uncorrelated with the assets in the FTSE Index on average.…”

“…The papers by Baur and Lucey (2010) and Capie et al (2005) investigated the hedging capabilities of gold against stocks, bonds and the American dollar. As gold and bitcoin have many similar traits the same methodology and similar explanatory variables will be applied in this paper.…”

“…Therefore the models will be Threshold GARCH models introduced by Glosten, Jaganathan and Runkle (1993) with Gaussian normal distributed error. Baur and Lucey (2010) analysed the hedging capabilities of gold against the MSCI stock and bond total return indices using an asymmetric ARCH model. Similarly the model in this paper will analyse the relationship between the return on bitcoin and the FTSE Index in an asymmetric ARCH model which thereby will identify if bitcoin can be used as a hedge against the 100 largest companies by market capitalization listed on the London stock exchange.…”

Mind the Gap: Psychological Barriers in Gold and Silver Prices

“…Gold and silver prices peaked near $1,900 and $50 an ounce in 2011, the highest since the Hunt Brothers cornered the silver market. Figure 1 shows that as the effects of the 2007/8 financial crisis faded and gold's safe haven property became less important to investors (Baur and Lucey, 2010) their price declines have been dramatic -with gold and silver prices falling by over $700 and $30 from their peaks. on Friday it was a "game-changer" from a longer-term technical perspective."…”