An empirical study on the impact of selected factors on the price of gold

Abstract

Over the history of mankind, gold has held an actual and a symbolic value. Gold played an important role as a mean of exchange, a store of value and a symbol of power. During COVID-19 pandemic, price of gold broke the $2,000 per ounce for the first time in history. The main objective of this study is to determine the impact of selected factor on the price of gold. The study utilises monthly data of US consumer price index, interest rate, US Fed funds rate, The Dow Jones, US money supply and silver prices from 1972 till 2020, to determine gold price utilising Ordinary Least Squares (OLS) method. The data is split into three sub-periods to observe the changes in gold price determinants throughout the period under scope. The empirical results indicate that there is a consistent negative relationship between gold price and exchange rate throughout the three periods; a positive relationship with inflation rate but only significant in the seventies of the past century; a positive relationship with US money supply; negative relationship with the Dow Jones; interest rate, and silver prices has no power in determining gold price.