Impact Analysis Of The Economic Crisis On The Price Of Gold

Since the outbreak of the subprime crisis, gold prices hit record highs, and other capital market basically had experienced varying degrees of decline. Gold became more attractive for investment and world’s central banks. The performance of the gold in the crisis are being more and more attention, the resulting problem is how the economic crisis is to affect the price of gold, gold crisis factor in whether the difference between the normal period?Based on the abnormal performance of the gold price during the economic crisis, this phenomenon is mainly derived from hedging properties due to the gold traditional currencies attributes. After Analyzed the changes in the price of gold and its influencing factors during the economic crisis, we believe that not all of the economic crisis will affect the price of gold. The economic crisis affect the price of gold mainly through two mechanisms:first, the economic crisis has an impact on gold’s generally impact factors (dollar index, money supply, etc.). Base on the qualitative as well as quantitative empirical analysis, we find that the dollar index and the price of gold will maintain synchronization more time (especially in the period of crisis major outbreak in the United States), money supply and the actual interest rate link more closely to the price of gold. Second, Gold hedging properties becomes notable during in the economic crisis. The mainly reason includes that the function of gold properties in risk-averse, as well as the reflects of investors’distrust of the expected credit currency. We find that VIX, CDS. bond spreads risk can be the well indicators to measure the hedge attributes. Empirical evidence shows that VIX and bond spreads have a significant effect on price of gold during the economic crisis.Finally, we believe that the short-term gold price has less risk, the main risk is that the degree of the recovery of the U.S. economy conditions and the evolution of the European debt crisis. In the long term, gold is still a good investment products as a hedge against inflation.