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Article
Publication date: 28 October 2014

Rifki Ismal

This paper analyzes the gold Murabahah contract, which tends to be very popular in the Indonesian Islamic banking industry. As the contract is very sensitive to the gold

Abstract

Purpose

This paper analyzes the gold Murabahah contract, which tends to be very popular in the Indonesian Islamic banking industry. As the contract is very sensitive to the gold price movement and speculative motive, a comprehensive assessment is done to assess the behavior of the gold price movement, behavior of the investors and the limits of the gold Murabahah contract. It proposes recommendations to manage the gold Murabahah contract and to mitigate its potential risks.

Design/methodology/approach

The paper examines the gold price, termination of contract and limitation of the amount of funds in the gold Murabahah transactions by using quantitative formulas, such as variance, expected prices and probability of occurrence. In addition, it includes a qualitative analysis of the historical pattern of daily gold prices in the past 12 years. As such, a combination of both approaches generates a comprehensive analysis and recommendations to policymakers, Islamic bankers and investors.

Findings

It finds some interesting outcomes with regard to the behavior of gold prices, behavior of investors regarding the gold Murabahah contract and intention of investors to terminate gold Murabahah contracts prior to their maturity date. Such outcomes become the material for the policy recommendations of the paper. Particularly, it proposes the margin of the Murabahah gold contract, tenor of the contract, down payment and a review of the base gold Murabahah regulation to manage the gold Murabahah contract and to mitigate risks.

Research limitations/implications

The paper does not consider macroeconomic variables such as inflation, exchange rate and economic growth which may affect the movement of the world’s gold prices. It does not examine the gold Murabahah contract in other countries, as it is believed that the gold Murabahah contract is very popular only in the Indonesian Islamic banking industry.

Originality/value

To the best of the author’s knowledge, this is the first paper examines the gold Murabahah contract in relation to the Indonesian Islamic banking industry.

Details

International Journal of Commerce and Management, vol. 24 no. 4
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 29 July 2014

Wen-Tsao Pan

When facing a clouded global economy, many countries would increase their gold reserves. On the other hand, oil supply and demand depends on the political and economic…

Abstract

Purpose

When facing a clouded global economy, many countries would increase their gold reserves. On the other hand, oil supply and demand depends on the political and economic situations of oil producing countries and their production technologies. Both oil and gold reserve play important roles in the economic development of a country. The paper aims to discuss this issue.

Design/methodology/approach

This paper uses the historical data of oil and gold prices as research data, and uses the historical price tendency charts of oil and gold, as well as cluster analysis, to discuss the correlation between the historical data of oil and gold prices. By referring to the technical index equation of stocks, the technical indices of oil and gold prices are calculated as the independent variable and the closing price as the dependent variable of the forecasting model.

Findings

The findings indicate that there is no obvious correlation between the price tendencies of oil and gold. According to five evaluating indicators, the MFOAGRNN forecast model has better forecast ability than the other three forecasting models.

Originality/value

This paper explored the correlation between oil and gold prices, and built oil and gold prices forecasting models. In addition, this paper proposes a modified FOA (MFOA), where an escape parameter Δ is added to Si. The findings showed that the forecasting model that combines MFOA and GRNN has the best ability to forecast the closing price of oil and gold.

Details

Kybernetes, vol. 43 no. 7
Type: Research Article
ISSN: 0368-492X

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Content available
Article
Publication date: 19 May 2020

Aiza Shabbir, Shazia Kousar and Syeda Azra Batool

The purpose of the study is to find out the impact of gold and oil prices on the stock market.

Abstract

Purpose

The purpose of the study is to find out the impact of gold and oil prices on the stock market.

Design/methodology/approach

This study uses the data on gold prices, stock exchange and oil prices for the period 1991–2016. This study applied descriptive statistics, augmented Dickey–Fuller test, correlation and autoregressive distributed lag test.

Findings

The data analysis results showed that gold and oil prices have a significant impact on the stock market.

Research limitations/implications

Following empirical evidence of this study, the authors recommend that investors should invest in gold because the main reason is that hike in inflation reduces the real value of money, and people seek to invest in alternative investment avenues like gold to preserve the value of their assets and earn additional returns. This suggests that investment in gold can be used as a tool to decline inflation pressure to a sustainable level. This study was restricted to use small sample data owing to the availability of data from 1991 to 2017 and could not use structural break unit root tests with two structural break and structural break cointegration approach, as these tests require high-frequency data set.

Originality/value

This study provides information to the investors who want to get the benefit of diversification by investing in gold, oil and stock market. In the current era, gold prices and oil prices are fluctuating day by day, and investors think that stock returns may or may not be affected by these fluctuations. This study is unique because it focusses on current issues and takes the current data in this research to help investment institutions or portfolio managers.

Details

Journal of Economics, Finance and Administrative Science, vol. 25 no. 50
Type: Research Article
ISSN: 2077-1886

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Article
Publication date: 11 February 2014

Wei Fan, Sihai Fang and Tao Lu

– This study aims to propose the idea of which macro-factors and how the macro-factors impact on the gold price.

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.

Details

China Finance Review International, vol. 4 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

Content available
Article
Publication date: 2 October 2017

Mongi Arfaoui and Aymen Ben Rejeb

The purpose of this paper is to examine, in a global perspective, the oil, gold, US dollar and stock prices interdependencies and to identify instantaneously direct and…

Abstract

Purpose

The purpose of this paper is to examine, in a global perspective, the oil, gold, US dollar and stock prices interdependencies and to identify instantaneously direct and indirect linkages among them.

Design/methodology/approach

A methodology based on simultaneous equations system was used to identify direct and indirect linkages for the period 1995-2015. The authors try initially to find theoretical answers to main question of the study by discussing causal bilateral relationships while focusing on multilateral interactions.

Findings

The results show significant interactions between all markets. The authors found a negative relation between oil and stock prices but oil price is significantly and positively affected by gold and USD. Oil price is also affected by oil futures prices and by Chinese oil gross imports. Gold rate is concerned by changes in oil, USD and stock markets. The US dollar is negatively affected by stock market and significantly by oil and gold price. Indirect effects always exist which confirm the presence of global interdependencies and involve the financialization process of commodity markets.

Originality/value

Motivation of this research paper is the substantial implications of price movements on real economy and financial markets. Understanding that co-movement has great value for investors, policy makers and portfolio managers. This paper differs from previous studies in several aspects. First, most of the research papers focus on bilateral linkages solely, while the authors’ investigation was implemented on all the four markets simultaneously. Second, the study was developed in a global framework using international data. The global analysis allows avoiding country specific effects.

Details

European Journal of Management and Business Economics, vol. 26 no. 3
Type: Research Article
ISSN: 2444-8451

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Article
Publication date: 11 February 2014

Wei Jiang, Pupu Luan and Chunpeng Yang

– The purpose of this paper is to research and analyze the price of gold futures based on heterogeneous investors' overconfidence.

Abstract

Purpose

The purpose of this paper is to research and analyze the price of gold futures based on heterogeneous investors' overconfidence.

Design/methodology/approach

This paper divides the traders of gold futures market into two kinds: the speculators and arbitrageurs, and then constructs a market equilibrium model of futures pricing to analyze the behaviors of the two kinds of traders with overconfidence. After getting the decision-making function, the market equilibrium futures price is attained on the condition of market clearing. Then, this paper analyzes how the overconfidence impacts on futures price, volatility of the price of gold futures and the effects on individual utility.

Findings

Under different market conditions, the overconfidence psychological impacts of heterogeneous investor on the price and volatility of futures are different, sometimes completely opposite.

Originality/value

In the past literature, the relationships between overconfidence and the price or volatility are positive; however, the study shows that sometimes it is positive, and sometimes it is negative.

Details

China Finance Review International, vol. 4 no. 1
Type: Research Article
ISSN: 2044-1398

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Book part
Publication date: 29 April 2013

Jean-Guy Loranger

The central hypothesis to be tested is the relevance of gold in the determination of the value of the US dollar as an international reserve currency after 1971. In the…

Abstract

The central hypothesis to be tested is the relevance of gold in the determination of the value of the US dollar as an international reserve currency after 1971. In the first section, the market value of the US dollar is analysed by looking at new forms of value (financial derivative products), the dollar as a safe haven, the choice of a standard of value and the role of special drawing rights in reforming the international monetary system. Based on dimensional analysis, the second section analyses the definition and meaning of a numéraire for international currency and the justification for a variable standard of value based on a commodity (gold). Then follows the theoretical foundation for the empirical and econometric analysis used later. The third section is devoted to the specification of an econometric model and a graphical analysis of the data. It is clear that an inverse relation exists between the value of the US dollar and the price of gold. The fourth section shows the estimations of the different specifications of the model including linear regression and cointegration analysis. The most important econometric result is that the null hypothesis is rejected in favour of a significant link between the price of gold and the value of the US dollar. There is also a positive relationship between gold price and inflation. An inverse statistically significant relation between gold price and monetary policy is shown by applying a dynamic model of cointegration with lags.

Details

Contradictions: Finance, Greed, and Labor Unequally Paid
Type: Book
ISBN: 978-1-78190-671-2

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Article
Publication date: 2 October 2017

Satish Kumar

The author aims to examine the long-run dynamic relation between gold price and inflation in the Indian context from 1982 to 2015. The author measures inflation using…

Abstract

Purpose

The author aims to examine the long-run dynamic relation between gold price and inflation in the Indian context from 1982 to 2015. The author measures inflation using consumer price index and wholesale price index (WPI). However, this study focuses on the long-run dynamic relation between gold price–WPI inflation.

Design/methodology/approach

The author uses Johansen’s cointegration technique (Johansen, 1991); single equation error correction model based on Pesaran et al. (2001) and Kanioura and Turner (2005); and the Saikkonen and Lütkepohl (2000) approach. The author also uses a time-varying regression framework in level form based on Kalman filter to examine the dynamic nature of gold–WPI relation.

Findings

The author finds no evidence of cointegration between gold and WPI. However, The author reports a significant dynamic relation between gold and inflation using a Kalman filter framework, and the comovement between these variables has in fact increased in the past decade. The results further indicate that variation in gold’s sensitivity to inflation can be explained by real effective exchange rate which supports the notion of using gold as an alternative to paper currency. Moreover, the WPI beta of gold is found to be predicted by both short- and long-term interest rate changes highlighting the monetary value of gold as a valuable asset.

Practical implications

From an emerging economy point of view, the results have implications for policy makers, particularly the central banks. The results of this paper caution the Reserve Bank of India against increasing its gold holdings as a reserve asset presuming that gold would preserve its purchasing power parity, at the same time providing a hedge against inflation.

Originality/value

To the best of the author’s knowledge, this is the first study to examine the gold price–inflation relation in the Indian market for such a long period of time. More importantly, the study shows that the changes in gold’s long-term sensitivity to WPI can be forecast using fundamental variables like interest rates.

Details

Studies in Economics and Finance, vol. 34 no. 4
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 January 2004

DIPAK GHOSH, ERIC J. LEVIN, PETER MACMILLAN and ROBERT E. WRIGHT

This paper attempts to reconcile an apparent contradiction between short‐run and long‐run movements in the price of gold. The theoretical model suggests a set of…

Abstract

This paper attempts to reconcile an apparent contradiction between short‐run and long‐run movements in the price of gold. The theoretical model suggests a set of conditions under which the price of gold rises over time at the general rate of inflation and hence be an effective hedge against inflation. The model also demonstrates that short‐run changes in the gold lease rate, the real interest rate, convenience yield, default risk, the covariance of gold returns with other assets and the dollar/world exchange rate can disturb this equilibrium relationship and generate short‐run price volatility. Using monthly gold price data (1976–1999), and cointegration regression techniques, an empirical analysis confirms the central hypotheses of the theoretical model.

Details

Studies in Economics and Finance, vol. 22 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 May 1997

Anghel N. Rugina

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual…

Abstract

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

Details

International Journal of Social Economics, vol. 24 no. 5
Type: Research Article
ISSN: 0306-8293

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