Gold and Inflation(s) – A Time-Varying Relationship

23 Pages Posted: 19 Nov 2015

See all articles by Samuel Vigne

Samuel Vigne

Queen's University Belfast; Queen's University Belfast - Queen's Management School

Brian M. Lucey

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

Date Written: November 19, 2015


What is the relationship between gold prices and inflation? The answer does not only depend on the studied time window, but also on the definition of inflation. We work with forty years of data and apply a Johansen test of cointegration to the price of gold and inflation indices in the United States of America, the United Kingdom and Japan. We also study the relationship between gold and liquid money supply in order to look at inflation from a more classical point of view. We further use a formal test for time variation and proceed to extract time varying cointegration relationships. Evidence points to a break in the relationship(s) of gold and official inflation in the mid 1990’s in the USA and to less clear results for the UK and Japan. However, gold seems to have offered a protection against an increased money supply throughout nearly the entire past 40 year period in the US and the UK but failed to do so in Japan. Supporting previous findings by Batten, Ciner, and Lucey (2014), we find evidence for a time-varying relationship in cointegration between gold and inflation in nearly all series under study and support our findings with a battery of robustness tests looking at predicted inflation and inflation surprise.

Keywords: Gold, Inflation, Money Supply, Cointegration, Time-Varying Cointegration

JEL Classification: C22, E31, G1

Suggested Citation

Vigne, Samuel and Lucey, Brian M., Gold and Inflation(s) – A Time-Varying Relationship (November 19, 2015). Available at SSRN: or

Samuel Vigne

Queen's University Belfast ( email )

25 University Square
Belfast, BT7 1NN

Queen's University Belfast - Queen's Management School ( email )

Riddel Hall
185 Stranmillis Road
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United Kingdom

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

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

University of Sydney Business School ( email )

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Sydney, NSW 2006

University of Economics Ho Chi Minh City ( email )

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

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