The intrinsic value of gold: an exchange rate-free price index
dc.contributor.author | Harris, RDF | |
dc.contributor.author | Shen, J | |
dc.date.accessioned | 2017-09-11T08:19:36Z | |
dc.date.issued | 2017-09-21 | |
dc.description.abstract | In this paper, we propose a gold price index that enables market participants to separate the change in the ‘intrinsic’ value of gold from changes in global exchange rates. The index is a geometrically weighted average of the price of gold denominated in different currencies, with weights that are proportional to the market power of each country in the global gold market. Market power is defined as the impact that a change in a country’s exchange rate has on the price of gold expressed in other currencies. We use principal components analysis to reduce the set of global exchange rates to four currency ‘blocs’ representing the U.S. dollar, the euro, the commodity currencies and the Asian currencies, respectively. We estimate the weight of each currency bloc in the index in an error correction framework using a broad set of variables to control for the unobserved intrinsic value. We show that the resulting index is less volatile than the USD price of gold and, in contrast with the USD price of gold, has a strong negative relationship with global equities and a strong positive relationship with the VIX index, both of which underline the role of gold as a safe haven asset. | en_GB |
dc.identifier.citation | Vol. 79, pp. 203-217 | en_GB |
dc.identifier.doi | 10.1016/j.jimonfin.2017.09.007 | |
dc.identifier.uri | http://hdl.handle.net/10871/29277 | |
dc.language.iso | en | en_GB |
dc.publisher | Elsevier | en_GB |
dc.rights.embargoreason | Under embargo until 21 March 2019 in compliance with publisher policy | en_GB |
dc.rights | © 2017. This version is made available under the CC-BY-NC-ND 4.0 license: https://creativecommons.org/licenses/by-nc-nd/4.0/ | |
dc.subject | Gold price index | en_GB |
dc.subject | Commodities | en_GB |
dc.subject | Exchange rates | en_GB |
dc.subject | Cointegration | en_GB |
dc.subject | Error correction mechanism | en_GB |
dc.title | The intrinsic value of gold: an exchange rate-free price index | en_GB |
dc.type | Article | en_GB |
dc.identifier.issn | 0261-5606 | |
dc.description | This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this record. | en_GB |
dc.identifier.journal | Journal of International Money and Finance | en_GB |
dc.rights.uri | https://creativecommons.org/licenses/by-nc-nd/4.0/ | |
rioxxterms.version | AM | |
refterms.dateFCD | 2017-09-11T08:19:36Z | |
refterms.versionFCD | AM | |
refterms.dateFOA | 2019-03-21T00:00:00Z |
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Except where otherwise noted, this item's licence is described as © 2017. This version is made available under the CC-BY-NC-ND 4.0 license: https://creativecommons.org/licenses/by-nc-nd/4.0/