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Gold and platinum: Toward solving the price puzzle

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  • Kearney, Adrienne A.
  • Lombra, Raymond E.

Abstract

Gold and platinum prices are positively correlated over 1985-2006. Yet, over shorter sample periods the correlation changes from positive to negative (1996-2001) and back. The objective of this paper is to determine whether this shift is the result, at least in part, of the rapid increase in forward sales by gold producers, which had the effect of substantially lowering gold prices in the second half of the 1990s (Kearney, A. & Lombra, L. (2008). The non-neutral short run effects of derivatives on gold prices. Applied Financial Economics, 18, 985-994). The results show declining gold prices are associated with large net increases in forward sales, while rising gold prices are associated with declining forward sales or producer dehedging.

Suggested Citation

  • Kearney, Adrienne A. & Lombra, Raymond E., 2009. "Gold and platinum: Toward solving the price puzzle," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 884-892, August.
    • Handle: RePEc:eee:quaeco:v:49:y:2009:i:3:p:884-892
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    References listed on IDEAS

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    1. Nicholas Taylor, 1998. "Precious metals and inflation," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 201-210.
    2. Adam, Tim R. & Fernando, Chitru S., 2006. "Hedging, speculation, and shareholder value," Journal of Financial Economics, Elsevier, vol. 81(2), pages 283-309, August.
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    5. Adrienne Kearney & Raymond Lombra, 2008. "Nonneutral short-run effects of derivatives on gold prices," Applied Financial Economics, Taylor & Francis Journals, vol. 18(12), pages 985-994.
    6. Joseph G. Haubrich, 1998. "Gold prices," Economic Commentary, Federal Reserve Bank of Cleveland, issue Mar.
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