Gold, the Golden Constant, COVID-19, 'Massive Passives' and Déjà Vu

18 Pages Posted: 7 Aug 2020 Last revised: 17 Sep 2020

See all articles by Claude B. Erb

Claude B. Erb

TR

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Tadas E. Viskanta

Ritholtz Wealth Management

Date Written: August 5, 2020

Abstract

Currently the real, inflation-adjusted, price of gold is almost as high as it was in January 1980 and August 2011. Since 1975, periods of high real gold prices have occurred during periods of elevated concern about high future price inflation. Five years after the real price peaks in January 1980 and August 2011 the nominal (real) prices of gold fell 55% (67%) and 28% (33%), respectively. Today’s high real price of gold suggests that gold is an expensive inflation-hedge with a low prospective real return. However, “massive passive” ETF financialization of gold ownership may introduce a period of “irrational exuberance”.

See our related work: The Golden Dilemma.

Keywords: Gold, Golden constant, Real gold, ETF holdings, Inflation, Hyperinflation, GLD, Fundamental value, Inflation hedge, COVID-19

JEL Classification: G10, G11, G12, G15, G28, G01, G02, E31, E58, N20

Suggested Citation

Erb, Claude B. and Harvey, Campbell R. and Viskanta, Tadas, Gold, the Golden Constant, COVID-19, 'Massive Passives' and Déjà Vu (August 5, 2020). Available at SSRN: https://ssrn.com/abstract=3667789 or http://dx.doi.org/10.2139/ssrn.3667789

Claude B. Erb

TR ( email )

CA 90272
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tadas Viskanta

Ritholtz Wealth Management ( email )

24 West 40th Street
New York, NY 10018
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3,272
Abstract Views
10,937
rank
3,654
PlumX Metrics