A Golden Bet: Gold Mining Equities versus Gold

33 Pages Posted: 19 Feb 2014

Date Written: February 17, 2014

Abstract

If there is a “long-run equilibrium” price relationship between gold and gold mining equities, then 1) the price of gold “suggests” that in the short-run the price of gold mining equities could rise 100% and 2) the price of gold mining equities “suggests” that in the short-run the price of gold could fall 50%. A popular ratio of the price of “gold miner equities” relative to the price of gold tells the same story. Though the long-run price of gold may be characterized as a “golden constant,” in the long-run gold mining equities are seemingly a “wasting asset.”

Keywords: gold, gold mining equities, the real price of gold, golden constant, mean reversion, CAPE ratio, pairs trade, equilibrium, Howard Marks, Ed Leamer

JEL Classification: G10, G11, G12, G15, G28, E58, N20

Suggested Citation

Erb, Claude B., A Golden Bet: Gold Mining Equities versus Gold (February 17, 2014). Available at SSRN: https://ssrn.com/abstract=2397540 or http://dx.doi.org/10.2139/ssrn.2397540

Claude B. Erb (Contact Author)

TR ( email )

CA 90272
United States

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