‘The Financial Economics of Gold – A Survey’ by Dr. Fergal O’Connor
Tuesday, February 23, 2016
LBMA PhD Bursary holder, Dr. Fergal O’Connor, has co-authored a review of all the academic literature on the financial economics of gold
As part of his PhD the outgoing LBMA PhD Bursary holder, Dr. Fergal O’Connor, has co-authored a review of all the academic literature on the financial economics of gold with Prof. Brian Lucey, Prof. Johnathan Batten and Prof. Dirk Baur. It reviews the academic research carried out on gold from an investment perspective.
The review begins by discussing how the gold markets operate, including the leasing market and a review of which market for gold is dominant. It then proceed to examine the research on physical gold demand and supply detailing their drivers including the published papers available on jewellery, central banks and producer hedging. The gold price’s relationship to mine production is then discussed.
Next this survey analyses gold as an investment beginning with its ability to hedge various financial markets risks along with a review of golds safe haven status in market crises. The available research on gold’s relationship with the other precious metals is analysed, along with currencies, gold mining stocks and Gold ETFs. Whether the gold market is informationally efficiency is discussed, as well as the issue of whether asset price bubbles occur in the gold market. What is known about gold's major macroeconomic relationships with inflation and interest rates is examined, particularly with respect to what is the long run driver of the gold price. Finally the very nascent literature on the behavioural economics literature surrounding gold is summarised.
While primarily written for an academic audience to summarise what is now know about gold and facilitate further research it is hoped that this will also serve as a resource to the gold market as a whole.
The final draft of the paper is freely available here and here in its final edited form for a fee payable to the publishing journal. The Summary Paper originated from a blog Fergal began with Prof. Lucey available here.