Dr Brian Lucey and Dr Fergal O’Connor have just published some interesting research on the correlations of the gold price and gold mining indices.
In ‘Are Gold Bugs Coherent?’, the academics use wavelet models to surface the relationship between gold miners stock prices and the price of gold. Specifically, they examine the relationship between the gold price and the NYSE ARCA Gold Bugs index of gold miner share prices over a 17 year period using wavelet analysis.
They find that
“that there is little relationship in the short run but some significant and long standing long run relationships and that gold prices appear to lead gold miner stock prices.”
There is now a large body of academic research which shows that gold is a safe haven asset and a hedging instrument and can play a “useful role in reducing a portfolio’s risk.”
This has again been seen in recent weeks with gold having risen by more than 4% year to date, while leading stock indices such as the S&P 500 are down by more than 7%.
The research entitled ‘Are Gold Bugs Coherent?’ can be accessed here
LBMA Gold Prices
25 Jan: USD 1,103.70, EUR 1,020.29 and GBP 773.96 per ounce
22 Jan: USD 1,097.65, EUR 1,012.55 and GBP 769.63 per ounce
21 Jan: USD 1,096.80, EUR 1,006.98 and GBP 774.99 per ounce
20 Jan: USD 1,093.20, EUR 999.73 and GBP 771.08 per ounce
19 Jan: USD 1,087.00, EUR 999.77 and GBP 759.79 per ounce