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Macro-factors on gold pricing during the financial crisis

Author

Listed:
  • Wei Fan
  • Sihai Fang
  • Tao Lu

Abstract

Purpose - – This study aims to propose the idea of which macro-factors and how the macro-factors impact on the gold price. Design/methodology/approach - – An EGARCH model is applied to test the volatility of gold price. A VAR method is applied to validate the idea by decomposing gold's value into three parts according to its features. Findings - – Three macro-factors have significant impact on the gold's price. The USDX index is negatively correlated with the gold price, while the CRB index and the US Treasury CDS spreads are positively correlated with the gold price. In particular, it is found that the one-lagged CRB index, one-lagged USDX index, and two-lagged US Treasury CDS spreads have significant impact on the gold price. Research limitations/implications - – The findings in this study suggest a normal case of the gold price. However, in particular cases, new models or new parameters may need to be introduced. Practical implications - – This paper bridges the gap between theory and practice on the gold pricing model. The three-factor model can be used for trading in the field of gold investment. Originality/value - – This paper provides a composite idea for investors and researchers to study the gold price.

Suggested Citation

  • Wei Fan & Sihai Fang & Tao Lu, 2014. "Macro-factors on gold pricing during the financial crisis," China Finance Review International, Emerald Group Publishing Limited, vol. 4(1), pages 58-75, February.
    • Handle: RePEc:eme:cfripp:v:4:y:2014:i:1:p:58-75
    DOI: 10.1108/CFRI-09-2012-0097
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    Citations

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    Cited by:

    1. Joel Verghese & Phaik Nie Chin, 2022. "Factors affecting investors’ intention to purchase gold and silver bullion: evidence from Malaysia," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(1), pages 41-51, March.
    2. Pan, Wei-Fong, 2018. "Sentiment and asset price bubble in the precious metals markets," Finance Research Letters, Elsevier, vol. 26(C), pages 106-111.

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