The relative valuation of gold

Arbeitspapier

Gold is a globally traded asset and held in large quantities by investors and central banks. Since there is no established model to assess if the price of gold is overvalued or undervalued, we propose a relative valuation framework based on gold price ratios. We analyze gold prices relative to commodity prices, consumer prices, stock prices, dividend and bond yields and find that the relative value of gold varies significantly over time indicating pronounced periods of mispricing of gold relative to other assets. An analysis of the factors which drive these variations demonstrates that inflation expectations and uncertainty have a strong influence on gold ratios while macroeconomic fundamentals are less important. More specifically, a boost in confidence decreases the relative price of gold while heightened uncertainty increases the relative price of gold which confirms the role of gold as a safe haven.

Object Details

• ISBN: 978-3-86788-701-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 604

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; International Financial Markets
• Subject: Gold ; relative valuation ; gold-silver ratio ; safe haven ; Bayesian econometrics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baur, Dirk G. ; Beckmann, Joscha ; Czudaj, Robert
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2016

Further information

• DOI: doi:10.4419/86788701
• Handle: http://hdl.handle.net/10419/128630
• Last update: 10.03.2025, 11:41 AM CET