Trinity College Dublin

Skip to main content.

Top Level TCD Links

Is Gold a Safe Haven? International Evidence

Dirk G. Baur, Dublin City University – Business School
Thomas K. McDermott, Trinity College Dublin – Institute for International Integration Studies

Abstract

The aim of this paper is to examine the role of gold in the global financial system. We test the hypothesis that gold represents a safe haven against stocks of major emerging and developing countries. A descriptive and econometric analysis for a sample spanning a 30 year period from 1979-2009 shows that gold is both a hedge and a safe haven for major European stock markets and the US but not for Australia, Canada, Japan and large emerging markets such as the BRIC countries. We also distinguish between a weak and strong form of the safe haven and argue that gold may act as a stabilizing force for the financial system by reducing losses in the face of extreme negative market shocks. Looking at specific crisis periods, we find that gold was a strong safe haven for most developed markets during the peak of the recent financial crisis.

JEL: G10, G11, G14, G15
Keywords: gold, safe haven, financial markets, uncertainty


Last updated 28 August 2014 by IIIS (Email).