The Price of Gold as a Hedge Against the US Dollar

We address the issue of whether the dollar (US dollar) price of gold can be used to hedge the external purchasing power of the dollar. We decompose the dollar price of gold into two parts: a global price of gold and a global price of the dollar. We find that there is no correlation between fluctuati...

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Bibliographic Details
Main Authors:	Michael Kunkler, Ronald MacDonald
Format:	Article
Language:	English
Published:	Tuwhera Open Access Publisher 2016-06-01
Series:	Applied Finance Letters
Subjects:	Gold Exchange rates Hedge
Online Access:	https://ojs.aut.ac.nz/applied-finance-letters/article/view/33

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spelling	doaj-0f70ba61b19541afa10d39adef68d73f2020-11-25T02:29:38ZengTuwhera Open Access PublisherApplied Finance Letters2253-57992253-58022016-06-015110.24135/afl.v5i1.33The Price of Gold as a Hedge Against the US DollarMichael Kunkler0Ronald MacDonald1Relative Markets Limited, London, UKAdam Smith Business School, University of Glasgow, Glasgow, UKWe address the issue of whether the dollar (US dollar) price of gold can be used to hedge the external purchasing power of the dollar. We decompose the dollar price of gold into two parts: a global price of gold and a global price of the dollar. We find that there is no correlation between fluctuations in the global price of gold and fluctuations in the global price of the dollar, or fluctuations in the global price of any individual currency. We show that the observed negative correlation reported in the literature between fluctuations in the dollar price of gold and fluctuations in the dollar is caused by the appearance of the dollar in both variables. The dollar appears in the dollar price of gold with a negative sign that tilts the correlation with fluctuations in the dollar towards negative one. https://ojs.aut.ac.nz/applied-finance-letters/article/view/33GoldExchange ratesHedge
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Michael Kunkler Ronald MacDonald
spellingShingle	Michael Kunkler Ronald MacDonald The Price of Gold as a Hedge Against the US Dollar Applied Finance Letters Gold Exchange rates Hedge
author_facet	Michael Kunkler Ronald MacDonald
author_sort	Michael Kunkler
title	The Price of Gold as a Hedge Against the US Dollar
title_short	The Price of Gold as a Hedge Against the US Dollar
title_full	The Price of Gold as a Hedge Against the US Dollar
title_fullStr	The Price of Gold as a Hedge Against the US Dollar
title_full_unstemmed	The Price of Gold as a Hedge Against the US Dollar
title_sort	price of gold as a hedge against the us dollar
publisher	Tuwhera Open Access Publisher
series	Applied Finance Letters
issn	2253-5799 2253-5802
publishDate	2016-06-01
description	We address the issue of whether the dollar (US dollar) price of gold can be used to hedge the external purchasing power of the dollar. We decompose the dollar price of gold into two parts: a global price of gold and a global price of the dollar. We find that there is no correlation between fluctuations in the global price of gold and fluctuations in the global price of the dollar, or fluctuations in the global price of any individual currency. We show that the observed negative correlation reported in the literature between fluctuations in the dollar price of gold and fluctuations in the dollar is caused by the appearance of the dollar in both variables. The dollar appears in the dollar price of gold with a negative sign that tilts the correlation with fluctuations in the dollar towards negative one.
topic	Gold Exchange rates Hedge
url	https://ojs.aut.ac.nz/applied-finance-letters/article/view/33
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The Price of Gold as a Hedge Against the US Dollar

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