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Are Gold and Silver a Hedge against Inflation? A Two Century Perspective

Author

Listed:
  • Georgios Bampinas

    (Department of Economics, University of Macedonia)

  • Theodore Panagiotidis

    (Department of Economics, University of Macedonia)

Abstract
This study examines the long-run hedging ability of gold and silver prices against alternative measures of consumer price index for the UK and the US. We employ a dataset that spans from 1791 to 2010, and both a time-invariant and a time-varying cointegration framework. We find that gold can at least fully hedge headline, expected and core CPI in the long-run. This ability tends to be stronger when we allow for the long term dynamics to vary over time. The inflation hedging ability of gold is on average higher in the US compared to the UK. Silver does not hedge US consumer prices albeit evidence emerges in favor of a time-varying long-run relationship in the UK.

Suggested Citation

  • Georgios Bampinas & Theodore Panagiotidis, 2015. "Are Gold and Silver a Hedge against Inflation? A Two Century Perspective," Discussion Paper Series 2015_03, Department of Economics, University of Macedonia, revised Jul 2015.
    • Handle: RePEc:mcd:mcddps:2015_03
    as

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    More about this item

    Keywords

    gold prices; silver prices; inflation hedge; time-varying cointegration.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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