Understanding the nexus between oil and gold

This paper tries to explore the relationship between real oil price and real gold price over a period of 1990 April to 2013 August. In order to check for the impact of real oil price on the real gold, return on real oil and return on real gold are used. The study employed types of GARCH models which suggested that an increase in real oil price has positive effects on gold. The EGARCH model provides the evidence that a 10% increase in the oil price returns leads to 4.7% increase of gold and shocks to gold price have an asymmetric effect, which means positive and negative shocks have different effect on gold price in terms of magnitude.