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

Lookup NU author(s): Professor Dimitrios Gounopoulos

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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.

Publication metadata

Author(s): Agyei-Ampomah S, Gounopoulos D, Mazouz K

Publication type: Article

Publication status: Published

Journal: Journal of Banking and Finance

Year: 2014

Volume: 40

Pages: 507-521

Print publication date: 01/03/2014

Online publication date: 18/01/2014

Acceptance date: 18/12/2013

ISSN (print): 0378-4266

ISSN (electronic): 1872-6372

Publisher: Elsevier

URL: http://dx.doi.org/10.1016/j.jbankfin.2013.11.014

DOI: 10.1016/j.jbankfin.2013.11.014

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