Is gold a safe haven? International evidence

Dirk Baur () and Thomas McDermott ()

The Institute for International Integration Studies Discussion Paper Series from IIIS

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 30 year period from 1979-2009 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)
JEL-codes: G10 G11 G14 G15 (search for similar items in EconPapers)
Pages: 35 pages
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Citations: View citations in EconPapers (600)

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Journal Article: Is gold a safe haven? International evidence (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iis:dispap:iiisdp310

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