Relational Study Between Macroeconomic Variables and Gold Price: Latest Malaysian Evidence

Abstract

Gold is one of the world-leading commodities, which is sought after as jewellery as well as an investment. Despite gold advantage as a reliable store of value, its price has been as fluctuating as other commodities or assets such as crude oil and stock. Therefore, investors should be aware that gold is not totally resistant to market turmoil and economic crisis. Gold could be as vulnerable as other traditional investment vehicles. Hence, this paper focuses on investigating the macroeconomic variables affecting gold prices in Malaysia using monthly data from 2014 to 2018. This study uses Pearson Correlation and Multiple Linear Regression tests to determine significant relationships and effects between the independent variables, namely interest rates, inflation rates, crude oil price, and exchange rates with the dependent variable, namely gold price. The findings show that the interest rate has a significant negative effect on gold price while inflation rate, crude oil price, and exchange rate have a significant positive effect on gold price in Malaysia, respectively. The results suggest valuable information and insight to policymakers, researchers, and investors in decision making.

Economic and Financial Determinants of Gold ETF Price Volatility on the U.S. Futures Market (COMEX)

“…As already noted, the CPI may be a statistically significant factor in determining the gold price. Other research, done by [9] and [13] describe a weak, statistically insignificant positive relationship of crude oil on gold. They find inconclusive evidence of the influence of oil prices on gold.…”

“…Retesting for multicollinearity, there are no longer extreme collinearity cases with the determinants. 9 The Jarque-Bera test defines for a certain distribution its level of resemblance to a normal distribution [57]. The J-B value for the gold price is 7.640629, which is less than the critical value, at α=0.01, therefore H0 cannot be rejected.…”

“…Previous academic research shows evidence of a negative relationship between stock prices and the gold price. [8], [24], [16], [9] observe a statistically significant, negative relationship between the stock market and the gold price. Other research, done by [17], [25], [26], suggests a negative influence of the stock market on the gold price, but weak and statistically nonsignificant; they note a high volatility and spillover between the stocks, bonds, and the gold price in a dynamic relationship between them.…”

“…3 The paper is structured as follows: this section proceeds with a brief literature, section 2 is referred to the methodology, section 3 presents the data and the empirical results, while section 4 analyzes the findings, and Section 5 concludes. [7], [8] and [9] spot a positive, statistically significant relationship between inflation and gold. These studies are delivered in the context of various counties and periods, leading to a similar conclusion: CPI is a determinant of the gold price, and the relationship is positive.…”

“…Their research concludes the US dollar rate has some negative relationship with the golds price but is a weak determinant of the latter. [9] reports a positive impact of the US Dollar rate on the gold price. There is a consensus between the researchers on the significant negative impact of the strong US dollar on the gold price, than on the effect of inflation.…”