Gold price dynamics and the role of uncertainty

Joscha Beckmann, Theo Berger and Robert Czudaj

Quantitative Finance, 2019, vol. 19, issue 4, 663-681

Abstract: This study focuses on the dynamics of the gold price against bonds, stocks and exchange rates based on a disaggregation of the underlying relationships across different frequencies applying a wavelet decomposition. To analyze joint extreme movements (i.e. tail dependence), we adopt a copula approach, which helps us to assess the dependence between the returns of gold and other assets in calm and turmoil market times and therefore the hedge and safe haven functions of gold. We also examine whether gold prices are directly affected by changes in macroeconomic uncertainty, economic policy uncertainty and/or CPI forecasters disagreement. Analyzing data for nine economies for a sample period starting in 1985, we find that the role of gold changes significantly after the collapse of Lehman Brothers in 2008. Gold is unable to serve as a hedge or safe haven in the classical sense while the findings for the period prior to 2008 mostly suggest that gold is able to shield investors. Uncertainty measures display a surprising and time-varying relationship with the path of the gold price. While economic policy uncertainty is positively correlated with gold price changes, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold price changes.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (66)

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2018.1508879 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Gold Price Dynamics and the Role of Uncertainty (2017)
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:taf:quantf:v:19:y:2019:i:4:p:663-681

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2018.1508879

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().