Does Gold Offer a Better Protection Against Losses in Sovereign Debt Bonds than Other Precious Metals

Sam Agyei Ampomah, Dimitrios Gounopoulos, Khelifa Mazouz

Research output: Contribution to journalArticlepeer-review

56 Citations (SciVal)
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Abstract

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.
Original languageEnglish
Pages (from-to)507 - 521
Number of pages14
JournalJournal of Banking and Finance
Volume40
Issue numberMarch 2014
Early online date18 Jan 2014
DOIs
Publication statusPublished - 1 Aug 2014

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