![[Gamma] Scalping Please](https://ibkrcampus.com/wp-content/smush-webp/2024/04/tir-featured-8-700x394.jpg.webp "[Gamma] Scalping Please")
Excerpt
If you’re a regular reader of our blogs (and we hope you are!), you would not miss that we like to touch macro-economic subjects. One of that never-fading topics is the role of gold as a crisis hedge. The probably most known commodity is a popular choice for a portion of the total portfolio, from small investors to central banks, for various reasons (be it diversification or hedging). So let’s not further delay it, and today we ask: Is gold really a safe haven?
Often, when stock markets are in turmoil, investors seek so-called safe havens that at least hold the value of their wealth when macroeconomic conditions are worsening. The held consensus view is that gold acts as a hedge against geopolitical stress and falling USD. But is that really well-suited for everyone? What about investors that have other investments in various currencies? As we see later, the utility of gold really depends mainly on the investor’s main, primary, or base currency.
An older but widely accepted paper from Dirk G. Baur (2021) presents his research on 68 stock markets and gold in local currencies and US dollars. The good news is that for investors in more than 60 markets and countries investing in their local currencies, gold really can (in addition to the diversification effect) effectively act as a currency hedge. In addition, if you switch a portion of your portfolio from local currency to a gold-denominated asset, you will likely catch a mid-time-lasting bullish trend. The results for US dollar investors are not as statically significant. Furthermore, the safe-haven effect is less lasting (under ten days).
Another interesting point is that the heaven-safe effect of gold in local equity markets is enhanced by large outflows from them that are often directed into gold investment vehicles, causing larger drawdowns in stock markets and the weakening of local currencies. Would you like to find out how your local market particularly correlates with gold and its relationships? Look at sweet and easy-digestible tables in the paper’s appendix. Interested in different approaches on utilizing when best to invest in gold? Do not miss checking our related strategies in Screener.
Authors: Dirk G. Baur
Title: Is Gold a Safe Haven in all Currencies?
Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3947113
Originally posted on Quantpedia. Visit their blog to read the full article.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Quantpedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Quantpedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.