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Determinants of gold price movements: An empirical investigation in the presence of multiple structural breaks

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  • Chirwa, Themba G.
  • Odhiambo, Nicholas M.

Abstract

This study investigates the short- and long-run determinants of gold price movements in financial markets by taking into account multiple structural breakpoints using an ARDL-based error correction approach. The study used daily time series data from December 19, 2018 to May 15, 2020. The key variables used include international stocks and bond funds that are frequently traded on stock exchanges around the world. The results, based on the fourth breakpoint regime, reveal a significant positive relationship between gold price movements and LSE, Nikkei stocks, T.Rowe global multi-sector bond funds, and CBOE volatility index; and a significant negative association with Gmo emerging country debt and Pimco emerging markets local currency bond funds both in the short- and long-run. Other stocks, like NASDAQ, DJI, S&P500, only revealed negative short-run relationships; except for NYSE that was found to have a positive short-run association with gold price movements. Conversely, Goldman Sachs bonds revealed a significant positive long-run relationship with gold price movements. These results have significant policy implications for gold producers and investors, as both stocks and bonds are an important source of information in the determination of gold price movements both in the short- and long-run.

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  • Chirwa, Themba G. & Odhiambo, Nicholas M., 2020. "Determinants of gold price movements: An empirical investigation in the presence of multiple structural breaks," Resources Policy, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:jrpoli:v:69:y:2020:i:c:s0301420720308503
    DOI: 10.1016/j.resourpol.2020.101818
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    Cited by:

    1. Madziwa, Lawrence & Pillalamarry, Mallikarjun & Chatterjee, Snehamoy, 2022. "Gold price forecasting using multivariate stochastic model," Resources Policy, Elsevier, vol. 76(C).
    2. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).
    3. Sahoo, Manoranjan & Nayak, Pragyan Parimita & Hanhaga, Manindra & Swain, Kiranbala & Mallick, Rajat Kumar, 2023. "Exploring the asymmetric effect of remittance inflows on gold import demand: Evidence from a large gold-consuming and remittance-receiving country," Resources Policy, Elsevier, vol. 85(PB).
    4. Chirwa, Themba, 2022. "The Growth-Poverty-Inequality Nexus in Malawi: A recomputation," MPRA Paper 114486, University Library of Munich, Germany.
    5. Rigamonti, Alessandro Paolo & Greco, Giulio & Capocchi, Alessandro, 2024. "Futures, provisional sales, and earnings management in the global gold mining industry," Finance Research Letters, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Gold prices; Cryptocurrencies; Stocks; Bonds; ARDL; Cointegration;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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