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Is gold a safe haven? International evidence

Dirk Baur () and Thomas McDermott ()

Journal of Banking & Finance, 2010, vol. 34, issue 8, 1886-1898

Abstract: The aim of this paper is to examine the role of gold in the global financial system. We test the hypothesis that gold represents a safe haven against stocks of major emerging and developing countries. A descriptive and econometric analysis for a sample spanning a 30Â year period from 1979 to 2009 shows that gold is both a hedge and a safe haven for major European stock markets and the US but not for Australia, Canada, Japan and large emerging markets such as the BRIC countries. We also distinguish between a weak and strong form of the safe haven and argue that gold may act as a stabilizing force for the financial system by reducing losses in the face of extreme negative market shocks. Looking at specific crisis periods, we find that gold was a strong safe haven for most developed markets during the peak of the recent financial crisis.

Keywords: Gold; Safe; haven; Financial; markets; Uncertainty (search for similar items in EconPapers)
Date: 2010
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