Is Gold a Hedge Against Inflation? A Wavelet Time-Scale Perspective

57 Pages Posted: 10 Oct 2015 Last revised: 7 Oct 2017

See all articles by Thomas Conlon

Thomas Conlon

University College Dublin

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; University of Economics Ho Chi Minh City

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division

Date Written: October 6, 2015

Abstract

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

Conlon, Thomas and Lucey, Brian M. and Uddin, Gazi Salah, Is Gold a Hedge Against Inflation? A Wavelet Time-Scale Perspective (October 6, 2015). Review of Quantitative Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2670896 or http://dx.doi.org/10.2139/ssrn.2670896

Thomas Conlon (Contact Author)

University College Dublin ( email )

Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/

Brian M. Lucey

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

University of Economics Ho Chi Minh City ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division ( email )

Linköping, 581 83
Sweden

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