Is Gold a ‘Safe-Haven’? - An Econometric Analysis

Gold has been considered a resplendent and highly coveted precious metal since the genesis of humankind. Gold standards have been the most common basis for monetary policies throughout history. Recently, gold price volatility has garnered the attention of many researchers, academicians and analysts. This paper is hence an attempt to analyze the correlation and causality relation that may run between gold prices and stock market returns across six countries. The study based on data related to six renowned stock exchanges, investigates the Granger causality in the Vector Error Correction Model for the period January 2002 to December 2011 and aims to analyze the reasons behind contrasting results observed across countries. The analysis provides the evidence of feedback causality between the variables. Thus, it concludes whether one variable can be used to predict the other, or not.