Gold as a crisis hedge revisited

What can I say about gold that hasn’t been said a thousand times? Not much, really. I have compiled my research some years ago in a paper. In essence, I think gold is predominantly driven by inflation expectations and real rates (with real rates typically being the flip side of inflation expectations priced in bond markets). But this relationship is non-linear and gold reacts far more in situations of extremely negative real rates such as an acute crisis or an unexpected spike in inflation expectations. There is little to no evidence that gold acts as a hedge against Dollar exchange rate fluctuations or to equity market volatility.

Read →