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Gold Price Dynamics and the Role of Uncertainty

Joscha Beckmann (joscha.beckmann@rub.de), Theo Berger (thberger@uni-bremen.de) and Robert Czudaj (robert-lukas.czudaj@wirtschaft.tu-chemnitz.de)
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Joscha Beckmann: University of Duisburg-Essen, Department of Economics, Chair for Macroeconomics
Theo Berger: University of Bremen, Department of Business Administration, Chair for Applied Statistics and Empirical Economy

No 6, Chemnitz Economic Papers from Department of Economics, Chemnitz University of Technology

Abstract: This study adopts a copula wavelet approach to analyze dynamics of the gold price against bonds, stocks and exchange rates based on disaggregation of the underlying relationships across different frequencies. We also examine whether gold prices are directly affected by changes in uncertainty. 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 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 developments, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold.

Keywords: bonds; exchange rates; gold; hedge; safe haven; stocks; uncertainty (search for similar items in EconPapers)
JEL-codes: G11 G15 C58 (search for similar items in EconPapers)
Date: 2017-05, Revised 2017-05
References: View references in EconPapers View complete reference list from CitEc
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Published in Chemnitz Economic Papers, May 2017, pages 1-26

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https://www.tu-chemnitz.de/wirtschaft/vwl1/RePEc/d ... d_price_dynamics.pdf First version, 2017 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:tch:wpaper:cep006

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