Central Banks and Gold

Dirk G. Baur

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

July 20, 2016

FIRN Research Paper

Central banks hold gold reserves that are designed to build confidence in fiat currency. This confidence is undermined if the price of gold falls significantly or rises significantly. Central banks thus have an incentive to manage the price of gold. Such management is evident in fixed gold prices in the early 20th century, in Central Bank Gold Agreements more recently and in the asymmetric correlation between monthly central bank gold reserve changes and gold price changes. The empirical analysis further analyzes gold lending by central banks, linkages between central banks, bullion banks and mining companies and the gold carry trade. We conclude that coordinated and shadowy gold operations by central banks are necessary for successful gold price and gold reserves management and demonstrate the power of market forces relative to central banks.

Number of Pages in PDF File: 31

Keywords: gold, manipulation, central banks, gold lending, gold carry trade

JEL Classification: E30, E40, E50, F33, G14

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Date posted: September 17, 2013 ; Last revised: July 20, 2016

Suggested Citation

Baur, Dirk G., Central Banks and Gold (July 20, 2016). FIRN Research Paper. Available at SSRN: https://ssrn.com/abstract=2326606 or http://dx.doi.org/10.2139/ssrn.2326606

Contact Information

Dirk G. Baur (Contact Author)
University of Western Australia - Business School ( email )
School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
HOME PAGE: http://www.firn.org.au

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