7 things we know about gold…

So, one major area of my research is on gold. Here is an update on where that research is at. Click here for the downloadable versions or look at my SSRN page

  1. Gold market investors are as irrational as we feared. They are prone to bouts of overreaction in relation to price changes but underreaction to ETF flows. There are long periods of over-optimism and over-pessimism. Aggarwal, R., Lucey, B. M., & O’Connor, F. A. (2014). Rationality in precious metals forward markets: Evidence of behavioural deviations in the gold markets. Journal of Multinational Financial Management, 25-26, 110-130. 
  2. The much posited relationship between gold and inflation? In the USA its not as stable as one might think or hope. In fact, it may be a statistical artefact of the 1980s. Batten, J. A., Ciner, C., & Lucey, B. M. (2014). On the economic determinants of the gold-inflation relation. Resources Policy, 41(1), 101-108.
  3. You might, using some techniques from physics, be able to make a profitable trading rule based on the fractal patterns in gold-silver spreads at high frequency Batten, J. A., Ciner, C., Lucey, B. M., & Szilagyi, P. G. (2013). The structure of gold and silver spread returns. Quantitative Finance, 13(4), 561-570.
  4. Yep, gold really is best treated as a monetary asset, at least in terms of its relationship with exchange rates and with regard to oil prices. Ciner, C., Gurdgiev, C., & Lucey, B. M. (2013). Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates. International Review of Financial Analysis, 29, 202-211.
  5. Shanghai, as a gold market, is isolated from the world market. It will take a very long time for that to change. Lucey, B. M., Larkin, C., & O’Connor, F. (2014). Gold markets around the world – who spills over what, to whom, when? Applied Economics Letters, 21(13), 887-892.
  6. London and New York are the main drivers of the world gold market. But as they have different strengths – london as a cash center, NY for futures, the price determination switches between them according to geopolitical versus financial risks dominating. Lucey, B. M., Larkin, C., & O’Connor, F. A. (2013). London or new york: Where and when does the gold price originate? Applied Economics Letters, 20(8), 813-817. 
  7. We know gold acts as a safe haven. But so also can silver, platinum or palladium, Looking at these over time, it turns out that silver is nearly as good a safe haven asset as gold. Lucey, B. M., & Li, S. (2014). What precious metals act as safe havens, and when? some US evidence. Applied Economics Letters, 
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