Is Gold a Hedge Against Inflation? A Wavelet Time-Scale Perspective
57 Pages Posted: 10 Oct 2015 Last revised: 7 Oct 2017
Date Written: October 6, 2015
Among the many presumed characteristics of gold, the ability to act as an enduring store of value is frequently noted. In this paper, the ability of gold to dynamically hedge against inflation is examined for various holding periods using the continuous wavelet transformation. Gold is first established as both a short- and long-term hedge against realized inflation for a number of developed economies. Dynamic analysis demonstrates that these hedging properties are not limited to a single historical cohort. Next, gold is shown to co-move with unexpected inflation across all countries examined, albeit with some variation in the direction of the relationship. Finally, the ability of both gold futures and gold stocks to act as a hedge against inflation is demonstrated.
Keywords: Gold, Realized Inflation, Unexpected Inflation, Holding Period
JEL Classification: E31, G10, G15, C14
Suggested Citation: Suggested Citation