RT Journal Article
SR Electronic
T1 The Golden Constant
JF The Journal of Investing
FD Institutional Investor Journals
SP 94
OP 100
DO 10.3905/joi.2017.26.1.094
VO 26
IS 1
A1 Erb, Claude B.
A1 Harvey, Campbell R.
YR 2017
UL http://joi.pm-research.com/content/26/1/94.abstract
AB In The Golden Dilemma, Erb and Harvey explored the possible relation between the real, inflation-adjusted price of gold and future real gold returns. This update suggests that the real return of gold over the next 10 years could be about –4% per year if the real price of gold mean reverts, or –12% per year if the real price of gold overshoots and declines to previous low, real price levels. This view reflects a golden constant hypothesis that inflation is the fundamental driver of the price of gold. Of course, it is possible to entertain other hypotheses. A golden constant perspective suggests a fair value price for gold of $840 per ounce and a possible overshoot price of $353 per ounce.TOPICS: Commodities, wealth management