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Should you buy gold stocks or paper gold?

Author

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  • Batten, Jonathan A.
  • Kinateder, Harald
  • Szilagyi, Peter G.

Abstract

We analyze which type of gold investment is better for investors by studying the determinants of returns on gold mining stocks (gold stocks) and gold exchange-traded commodities (gold ETCs) over the period from March 2012 to February 2024. We find that gold ETCs outperform gold stocks in both returns and risk, and respond significantly more positively to economic policy uncertainty (EPU), offering investors more favorable safe-haven properties. Gold stocks are also more sensitive to oil price increases than are gold ETCs, and their relative price performance is negatively related to both oil price changes and Gold VIX. We conclude that investing in gold stocks is less suitable for investors who buy gold as a safe-haven asset.

Suggested Citation

  • Batten, Jonathan A. & Kinateder, Harald & Szilagyi, Peter G., 2024. "Should you buy gold stocks or paper gold?," Finance Research Letters, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012315
    DOI: 10.1016/j.frl.2024.106202
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    More about this item

    Keywords

    Gold price; Gold exchange-traded commodities (ETCs); Gold stocks; Gold miners; Economic policy uncertainty (EPU); Oil price; Gold VIX; Portfolio decision; Safe haven;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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