Does gold offer a better protection against losses in sovereign debt bonds than other metals?

It is a commonly held view that gold protects investors’ wealth in the event of negative economic conditions. In this study, we test whether other metals offer similar or better investment opportunities in periods of market turmoil. Using a sample of 13 sovereign bonds, we show that other precious m...

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Bibliographic Details
Published inJournal of banking & finance Vol. 40; pp. 507 - 521
Main Authors Agyei-Ampomah, Sam, Gounopoulos, Dimitrios, Mazouz, Khelifa
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.03.2014
Elsevier Sequoia S.A
Subjects
Gold
Gold markets
Hedge
Hedging
Industrial metals
Investment policy
Loss control
Metals
Precious metals
Safe haven
Sovereign bonds
Sovereign debt
Studies
Gold
Precious metals
Hedge
Sovereign bonds
G11
G10
G14
Safe haven
Industrial metals
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Summary:It is a commonly held view that gold protects investors’ wealth in the event of negative economic conditions. In this study, we test whether other metals offer similar or better investment opportunities in periods of market turmoil. Using a sample of 13 sovereign bonds, we show that other precious metals, palladium in particular, offer investors greater compensation for their bond market losses than gold. We also find that industrial metals, especially copper, tend to outperform gold and other precious metals as hedging vehicles and safe haven assets against losses in sovereign bonds. However, the outcome of the hedge and safe haven properties is not always consistent across the different bonds. Finally, our analysis suggests that copper is the best performing metal in the period immediately after negative bond price shocks.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2013.11.014