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When Gold Meets Copper : A Comprehensive Look at the Informative Role of the Relative Value of Gold on Global Stock Markets

  • Donghoon Kim College of Business, Korea Advanced Institute of Science and Technology
  • Tai-Yong Roh Li Anmin Advanced Institute of Economic Research, Liaoning University, No. 66 Chongshan Middle Road, Huanggu District, Shenyang, China
  • Sun-Joong Yoon Dongguk Business School, Dongguk University, Seoul, Republic of Korea
Gold has similar characteristics with other commodity assets as raw material but at the same time has unique characteristics as a safe-haven asset in crisis periods. From this perspective, the relative value of gold may contain important information about investors’ expectations for future global financial markets. In this study, we comprehensively examine the information content of the relative value of gold. Notably, the Gold-to-Copper ratio demonstrates robust predictive power for short-term (from 3-month to 12-month) stock returns across numerous developed countries and global markets. We evaluate its performance under diverse economic conditions, highlighting heightened predictability during recessions. Additionally, we probe the role of copper price in shaping this relationship, revealing its influence even during economic expansions. Rigorous tests substantiate the Gold-Copper ratio’s consistent predictive capability across various scenarios, leading to significant economic gains.

  • Donghoon Kim
  • Tai-Yong Roh
  • Sun-Joong Yoon
Gold has similar characteristics with other commodity assets as raw material but at the same time has unique characteristics as a safe-haven asset in crisis periods. From this perspective, the relative value of gold may contain important information about investors’ expectations for future global financial markets. In this study, we comprehensively examine the information content of the relative value of gold. Notably, the Gold-to-Copper ratio demonstrates robust predictive power for short-term (from 3-month to 12-month) stock returns across numerous developed countries and global markets. We evaluate its performance under diverse economic conditions, highlighting heightened predictability during recessions. Additionally, we probe the role of copper price in shaping this relationship, revealing its influence even during economic expansions. Rigorous tests substantiate the Gold-Copper ratio’s consistent predictive capability across various scenarios, leading to significant economic gains.
Gold,Gold-Copper ratio,Global Stock Market,Economic Condition,Safe-Haven