NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Claude B. Erb

Los Angeles, CA 90272

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NBER Working Papers and Publications

January 2013The Golden Dilemma
with Campbell R. Harvey: w18706
While gold objects have existed for thousands of years, gold's role in diversified portfolios is not well understood. We critically examine popular stories such as 'gold is an inflation hedge'. We show that gold may be an effective hedge if the investment horizon is measured in centuries. Over practical investment horizons, gold is an unreliable inflation hedge. We also explore valuation. The real price of gold is currently high compared to history. In the past, when the real price of gold was above average, subsequent real gold returns have been below average consistent with mean reversion. On the demand side, we focus on the official gold holdings of many countries. If prominent emerging markets increase their gold holdings to average per capita or per GDP holdings of developed countries...

Published: The Golden Dilemma Claude B. Erb, CFA, and Campbell R. Harvey Financial Analysts Journal, July/August 2013, Vol. 69, No. 4: 10–42.

 
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