The Analysis Of Monetary Liquidity Impact On The Price Of Gold

The global economy fell into a rare financial crisis from the subprime crisis in2007, thefinancial crisis has affected not only the world’s financial markets，but also the global realeconomy. People feel the most is the contraction of monetary liquidity and financialdifficulties in running. With the sudden decrease of the global monetary liquidity，investorlacked of fund and declined in purchasing power, the prices of varies financial assets dropped.However, in order to minimize the loss in a crisis, people have been eyeing the gold withhedging function and hedge against inflation. The gold market is unusual hot when theeconomic recession. Gold demand drove gold price. However, investors in the gold market inthe infinite vision of full time, Gold prices hit a new high and then shifted all the way downwhile Investors had in a full vision of the gold market. Gold lost glory at the moment, andinvestors become ineffective. The gold market came to life once again and became the focusof attention after the Fed’s loose monetary policy. The monetary liquidity fluctuations andgold prices fluctuations caused the global financial community’s hot.This thesis is for experts and scholars from china and abroad in the impact analysis ofmonetary liquidity on asset prices and the analysis of impact on the price of gold, focuses on“the impact of monetary liquidity on the price of gold”.we combine with the movements ofthe last ten years of gold price, explain the meaning of monetary liquidity and metrics,analyze the impact of gold price of long term, medium term and short term, we use theextraction approach of volatility indicators, co integration approach, VAR, ECM and otherempirical methods to examine the relationship between the monetary liquidity and the price ofgold. We analysis the contribution of each factor by variance decomposition model, at last, weuse GARCH model to predict the future trend of gold price.By combining theoretical analysis and empirical analysis, we found monetary liquidity isthe most important factor which affect the short term price of gold, the impact of dollar indexon the price of gold is particularly important, according to the information already predict theprice of gold in the next two quarters, we provide specific advice for investors to use goldeffectively as a hedge and against inflation tool to control investment risk in the currenteconomic situation.