Does Gold Act as a Hedge Against Exchange Rates?
11 Pages Posted: 9 Jul 2020
Date Written: June 15, 2020
This paper investigates the roles of hedging and safe haven of gold against exchange rates using data from six major markets. We find that exchange rate Granger-causes the return on gold in both mean and variance level except for some extreme quantiles. The quantile-on-quantile regression results imply that gold can act as a hedge for exchange rates in France, India, Japan, the UK and the USA. This safe haven role presents a dynamic pattern depending on specific extreme quantiles. In China, however, there are no significant hedging opportunities.
Keywords: gold, exchange rate, hedge, causality-in-quantiles, quantile-on-quantile regression
JEL Classification: C22; G15
Suggested Citation: Suggested Citation