Gold Pricing Model During the Financial Crisis
17 Pages Posted: 9 May 2012 Last revised: 10 Jul 2012
Date Written: May 9, 2012
Abstract
As a special commodity, gold possesses multiple features: as commodity, currency and hedging instrument. Its currency and hedging features are well manifested during the first stage of this financial crisis since 2007. However, the hedging feature of gold was hardly discussed before. The above three features decompose gold’s value into three parts: the commodity value, the currency value and the risk premium value. In this paper, the CRB index, the USDX index and the U.S. Treasury CDS spread are selected as variables in our VAR model. As a result, we find that the USDX index is negatively correlated with the gold price, while the CRB index and the U.S. Treasury CDS spreads are positively correlated with the gold price. In particular, it is found that the one-lagged CRB index, one-lagged USDX index, and two-lagged U.S. Treasury CDS spreads have significant impact on the gold price.
Keywords: Gold, Financial crisis, Asset pricing
JEL Classification: E44, F31, G12
Suggested Citation: Suggested Citation
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