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The impact of monetary policy on gold price dynamics

Zhu, Yanhui; Fan, Jingwen; Tucker, Jon


Yanhui Zhu
Senior Lecturer in Economics

Jingwen Fan


© 2017 Elsevier B.V. Ever since the collapse of the Bretton-Woods system, gold has retained its function as an important monetary commodity (Baur and Lucey, 2010), and continues to provide important inflation forecasting information to monetary policy setters (Tkacz, 2007). However, Capie et al. (2005) highlight the instability of gold price dynamics through time, attributing it to unpredictable political attitudes and events. In this paper, we investigate gold price dynamics under different inflation regimes and stock market conditions using UK and US index-linked Treasury bond data. We show that gold lost its role as an inflation hedge after May 1997 in the UK, and after 2003 did not act as an inflation hedge in the US, supporting the argument that gold is an inflation hedge only in periods of high inflation and inflation expectations. Further, we show that gold retained its safe haven status throughout the sample period in both countries, but it did not act as a stock market hedge in the UK except during the 2008-9 global financial crisis. Finally, we conduct an event-study analysis of the impact of QE announcements from four leading central banks on the gold price in US dollars. While the QE announcements of the US Federal Reserve and the European Central Bank exerted a strong and weak influence on gold, respectively, the Bank of England and the Bank of Japan's QE announcements had no discernible impact on the gold price.


Zhu, Y., Fan, J., & Tucker, J. (2018). The impact of monetary policy on gold price dynamics. Research in International Business and Finance, 44, 319-331.

Journal Article Type Article
Acceptance Date Jul 3, 2017
Online Publication Date Jul 8, 2017
Publication Date Apr 1, 2018
Journal Research in International Business and Finance
Print ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 44
Pages 319-331
Keywords gold price, hedging, central banks, Bank of England independence, quantitative easing
Public URL
Publisher URL
Additional Information Additional Information : This is the author's accepted manuscript. The final published version is available here:


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