Gold as an Inflation Hedge: Long term and short term evidence with allowances for structural breaks
This paper investigates if investment in gold really is an effective hedge against inflation in the US for the long run as well as the short run. It studies the annual price of gold over the entire period since it has been freely floated i.e. from 1971 to 2012 along with the annual CPI figures for t...
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2013
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| Online Access: | https://eprints.nottingham.ac.uk/26726/ |
| Summary: | This paper investigates if investment in gold really is an effective hedge against inflation in the US for the long run as well as the short run. It studies the annual price of gold over the entire period since it has been freely floated i.e. from 1971 to 2012 along with the annual CPI figures for the same period. Both the gold prices and the price index data were sourced from the World Gold Council. The data was split in to two sub groups; 1971-1981 and 1981-2012.
Pearson and Spearman correlation coefficients and linear regression results were used for the short term analysis. The coefficient analysis showed that there was only a significant correlation in the first sub group and that in general there was a volatile relationship between the price of gold and the inflation rate. The linear regression confirmed these findings.
For the long term analysis the cointegration test of Engle and Granger (1987) were used. The final results confirmed that contrary to popular belief, there was no cointegrating relationship exhibited in either of the subgroups or throughout the entire data set. |
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