The Impact of US Macroeconomics on the Price of Gold

Proceedings of The 7th International Conference on Business, Management and Economics

Year: 2022

DOI:

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The Impact of US Macroeconomics on the Price of Gold

Kamaran Qader Yaqub

 

ABSTRACT: 

In the last few years, a sharp increase in the price of gold has been observed. Since gold has numerous functions, it provides macroeconomic safety and also is used as a hedge against inflation. The purpose of this research is to examine the impact of some US macroeconomic variables such as the rate of inflation, the interest rate, the unemployment rate, real GDP, and the US dollar Index on gold prices in the international market. This study employs the Generalized Method of Moment (GMM) model, using annual time-series data for the period 1971 to 2021. The findings of this research show that all variables have a statistically significant, with a one percent significance level except the unemployment rate which is statistically significant at a 5 percent level. Both the inflation rate and unemployment rate have a positive effect on the price of gold which is consistence with economic theory. Thus, it is shown that when the inflation rate increases by one percent, the gold price will increase by 1.32 percent. On the other hand, the gold price will increase by about 0.89 percent, when the rate of US unemployment increases by one percent. While the rest of the explanatory variables namely the interest rate, real GDP, and the US dollar index have a negative impact on the price of gold. The increase in the interest rate, real GDP, and US dollar index by one percent, lead to a decrease in the gold price by 0.391.91, and 2.21 percent respectively.

keywords: General Method of Moment, Gold, US Dollar