We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
GOLD: MORE ATTRACTIVE TO NON-U.S. THAN TO U.S. INVESTORS?
- Authors
Beckers, Stan; Soenen, Luc
- Abstract
This article examines how the performance of gold investment is affected by the relationship between the gold price and the strength of the U.S. dollar. Gold has always been an investment instrument whose popularity is closely linked to economic and political instability. European investors have a long history of including gold in their portfolios, whereas Americans have been more reluctant to follow this strategy. The majority of the gold transactions on these exchanges occur in U.S. dollars and the spot gold price is usually quoted in dollars. Any investor with a non-U.S. dollar base currency will therefore either explicitly or implicitly assume exchange risk exposure when investing in gold. This inherent exchange risk component may help account for the fact that gold-related investments are viewed differently by European portfolio managers. The negative correlation will significantly affect the returns to an investor in gold who has a non-U.S. dollar base currency. Such an investor might indeed borrow U.S. dollars to finance his gold purchases. Alternatively, one might buy U.S. dollars on the spot market to purchase gold and convert the receipts from the gold sale back into his base currency at the end of his holding period.
- Publication
Journal of Business Finance & Accounting, 1984, Vol 11, Issue 1, p107
- ISSN
0306-686X
- Publication type
Academic Journal
- DOI
10.1111/j.1468-5957.1984.tb00061.x