Gold as a hedge against the dollar

The extent to which gold has acted as an exchange rate hedge is assessed using weekly data for the last thirty years on the gold price and sterling-dollar and yen-dollar exchange rates. A negative, typically inelastic, relationship is indeed found between gold and these exchange rates, but the strength of this relationship has shifted over time. Thus, although gold has served as a hedge against fluctuations in the foreign exchange value of the dollar, it has only done so to a degree that seems highly dependent on unpredictable political attitudes and events.