Is gold a safe haven or a hedge for the US dollar? Implications for risk management

Juan Reboredo

Journal of Banking & Finance, 2013, vol. 37, issue 8, 2665-2676

Abstract: We assess the role of gold as a safe haven or hedge against the US dollar (USD) using copulas to characterize average and extreme market dependence between gold and the USD. For a wide set of currencies, our empirical evidence revealed (1) positive and significant average dependence between gold and USD depreciation, consistent with the fact that gold can act as hedge against USD rate movements, and (2) symmetric tail dependence between gold and USD exchange rates, indicating that gold can act as an effective safe haven against extreme USD rate movements. We evaluate the implications for mixed gold-currency portfolios, finding evidence of diversification benefits and downside risk reduction that confirms the usefulness of gold in currency portfolio risk management.

Keywords: C52; C58; F3; G1; Gold; Exchange rates; Hedge; Safe haven; Copulas (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (297)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426613001635
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:8:p:2665-2676

DOI: 10.1016/j.jbankfin.2013.03.020

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().