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Explanatory Mining for Gold: Contrasting Evidence from Simple and Multiple Regressions

24 Pages Posted: 20 Sep 2010  

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Date Written: September 20, 2010

Abstract

Gold traditionally has been used as a store of value and an inflation hedge. More recently, gold is also viewed as a hedge against uncertainty and a safe haven. This paper demonstrates that most of the properties regularly associated with gold are only valid within a simple regression framework but lose its strength and significance in a multiple regression framework. A descriptive and econometric analysis of gold and US economic and financial variables for a 30-year period from 1979 to 2010 shows that gold primarily serves as a hedge against a weaker US dollar and against higher commodity prices. In contrast, gold is not a hedge against higher consumer prices. The empirical results also indicate that gold evolved as a safe haven only recently.

Keywords: gold, store of value, inflation hedge, exchange rate, safe haven, uncertainty, cost of carry

JEL Classification: E40, F30, G10, G11

Suggested Citation

Baur, Dirk G., Explanatory Mining for Gold: Contrasting Evidence from Simple and Multiple Regressions (September 20, 2010). Available at SSRN: https://ssrn.com/abstract=1679558 or http://dx.doi.org/10.2139/ssrn.1679558

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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