Bennett S. LeBow College of Business
Real Interest Rate, Dollar Depreciation, and Gold Price Movements
Lanr an Lu LEBOW COB Business & Engineering
Dr . T hom as C hiang Faculty Mentor Finance
Poster Session B
This study is to examine gold price time series behavior. Literature argues that historical gold prices are influenced by the cause of inflation rate, interest rate, and some risk factors. Using monthly data for the sample period of 1991M01 to 2010M12, regression estimations were conducted by using EViews, which is a statistical software program. The resulting evidence suggests that in the long run, the gold price is positively correlated with exchange rate and S&P500, but negatively related to real interest rate. In the short run, the evidence suggests that the change of gold price is positively associated with change in the US dollar depreciation rate and negatively correlated with change of real interest rate; however, the variable of the change of S&P500 is insignificant. This study concludes that both dollar depreciation rate and real interest rate are the main factors being consistently able to explain gold price movements.
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