Macro-factors on gold pricing during the financial crisis
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.
Keywords
Acknowledgements
JEL classification – E44, F31, G12
Citation
Fan, W., Fang, S. and Lu, T. (2014), "Macro-factors on gold pricing during the financial crisis", China Finance Review International, Vol. 4 No. 1, pp. 58-75. https://doi.org/10.1108/CFRI-09-2012-0097
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited