Analysis of the Investment Potential and Inflation-Hedging Ability of Precious Metals
25 Pages Posted: 25 Jul 2007
Date Written: July 23, 2007
Gold and silver show strong evidence of ability to hedge stock portfolios and inflation during the period from 1970 to 2006. However, negative betas are only observed for the 1970s, suggesting that it is the inflation-hedging ability that is the cause of the stock-hedging ability. Both metals show high correlation with expected future inflation as measured by the TIPS spreads, confirming Greenspan's (1993) conjecture that gold prices are an indicator of expected inflation.
Keywords: gold, silver, inflation
JEL Classification: E31, G11
Suggested Citation: Suggested Citation