Does Gold Offer a Better Protection Against Sovereign Debt Crisis than Other Metals?

43 Pages Posted: 8 Nov 2013 Last revised: 15 Aug 2014

See all articles by Sam Agyei-Ampomah

Sam Agyei-Ampomah

Cranfield University - School of Management

Dimitrios Gounopoulos

University of Bath

Khelifa Mazouz

University of Bradford - School of Management

Date Written: November 26, 2013

Abstract

It is a commonly held view that gold protects investors’ wealth in the event of negative economic conditions. In this study, we test whether other metals offer similar or better investment opportunities in periods of market turmoil. Using a sample of 13 sovereign bonds, we show that other precious metals, palladium in particular, offer investors greater compensation for their bond market losses than gold. We also find that industrial metals, especially copper, tend to outperform gold and other precious metals as hedging vehicles and safe haven assets against losses in sovereign bonds. However, the outcome of the hedge and safe haven properties is not always consistent across the different bonds. Finally, our analysis suggests that copper is the best performing metal in the period immediately after negative bond price shocks.

Keywords: Gold; Precious Metals; Industrial Metals; Sovereign Bonds; Hedge; Safe Haven

JEL Classification: G10; G11; G14

Suggested Citation

Agyei-Ampomah, Sam and Gounopoulos, Dimitrios and Mazouz, Khelifa, Does Gold Offer a Better Protection Against Sovereign Debt Crisis than Other Metals? (November 26, 2013). Journal of Banking and Finance, 40, 2014, pp 507-521. Available at SSRN: https://ssrn.com/abstract=2351054

Sam Agyei-Ampomah

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom
+441234754375 (Phone)

HOME PAGE: http://www.som.cranfield.ac.uk/som/p19638/People/Faculty/Academic-Faculty-Listing-A-Z/Dr-Sam-Agyei-A

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Khelifa Mazouz

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

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