Research On The Relationship Between Gold Price And Inflation

In recent years,with the uncertainty of the brexit deal,trump taking office,the ups and downs of the sino-us trade war and many other events,and considering that central Banks have increased their gold holdings in 2018,and the end of the fed's interest rate hike cycle in late 2019 is likely to come to an end.Gold has regained the attention of many investors,and as a result of these events,investors have also become bullish on gold.As a result,the study of the trend of gold has also been pushed into the forefront.The idea that gold can fight inflation has been widely accepted,so this paper can study the trend of gold prices from the perspective of the relationship between gold and inflation.We observed the trend of gold price and inflation in the United States from 2000 to 2018,and found that the trend of gold price and inflation were generally similar,but there were several obvious deviations.Therefore,we raised the question:(1)whether gold is still a good tool to fight inflation from 2000 to 2018;(2)reasons for the obvious deviation between gold price and inflation from 2000 to 2018.This paper mainly explains these two problems by quantitative analysis and qualitative analysis.Firstly,this paper compared and analyzed the trend of gold price and inflation from 2000 to 2018,this paper proposes the hypothesis that gold price and inflation still have a codirectional change relationship.Then,empirical research is conducted.We test the co-integration relationship between gold price and inflation through the e-g two-step method,and establish an error correction model for the two,and obtain :(1)there is a long-term equilibrium relationship between gold price and inflation from January 2000 to December2018,that is,gold can still fight against inflation.(2)when there is a short-term deviation in the long-term equilibrium relationship between GP and CPI,this short-term deviation will be pulled back to the equilibrium state with an adjustment intensity of 16.72% per month.Secondly,this paper studied the deviation between gold price and inflation and its causes.In our analysis,we will convert the deviation between gold price and inflation into the study of the influencing factors of gold price.After our preliminary judgment,we conclude that the influencing factors of gold price include supply and demand of gold,dollar,10-year Treasury yield,stock index,inflation,oil,geopolitics and so on.After filtered,we choose the interpretation of the variable inflation(CPI),the 10-year us Treasury yields(TYT),the standard & poor's 500 index(SP),the price of crude oil(WTI),the price influence factor model to build,and by Johansen cointegration test and vector error correction model(VECM)respectively to test the existence of the co-integration relationship betweenvariables and model modification.Finally,Granger causality test,impulse response function and variance decomposition are used to analyze the causality between variables and the degree and change of various factors' influence on gold price.Our conclusions are as follows:(1)gold price is not only influenced by inflation,but also influenced by 10-year Treasury yield,stock index and crude oil price.(2)with the increase of lag period,the influence of various factors on gold price fluctuation also changes;(3)the 10-year Treasury yield is the biggest contributor,while inflation is only higher than the price of crude oil.Finally,combined with the conclusions of this paper,the paper puts forward Suggestions for investors.