Friday, 7th July 2006 (3600 views)

New research from two Scottish economics experts has proven the long-established 'myth' that gold is an effective hedge against US and global inflation.

The study, commissioned by the World Gold Council, was carried out by Eric J Levin, a research fellow at the University of Glasgow, and Robert E. Wright, Professor of Economics at the University of Strathclyde Business School.

Their findings showed that the relationship between the prices of gold and the US Consumer Price Index was clearly defined and measurable over the long-term and that, as a result, the precious metal could be effectively used as a hedge.

Although such a conclusion will come as no surprise to many economists and industry observers, the findings give conclusive proof that this long-held belief is based in fact.

This view had been discredited in some quarters when over a short period of time the two did not seem to correlate.

However, the extensive research from Mr Levin and Professor Wright is conclusive proof that even in the wake of some economic shock that causes a deviation of the relationship, the two will revert back to the status quo in the long-term.

 

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