An investigation into the changing relationship between the gold price and South African gold mining industry returns

Abstract

Background: It is accepted that the gold price impacts on the value of gold mining companies. Previous studies have shown that, in financial crises, gold is considered a ‘safe haven’ investment in developed markets. Aim: The aim of the study is to investigate whether an investment in gold mining stocks do provide gold price-linked safe haven benefits to investors in an emerging economy. An understanding of the possible safe haven benefits of their companies’ stocks and the variables that influence these benefits would be valuable to managers of gold companies when endeavouring to maximise shareholders’ wealth through hedging and investment decisions. Methods: Regression analysis is applied to investigate the relationship between gold mining returns, the gold price and the rand–dollar exchange rate within a multifactor model motivated by the arbitrage pricing theory. Results: The results indicate that there is a strong, yet changing, relationship between the gold price, the rand–dollar exchange rate and gold mining returns. Conclusion: This study extends the understanding of the changing South African gold mining industry in a world that is still recovering from the global financial crisis.

Gold mining stocks – an investor’s perspective

“…In this paper, this last-mentioned application is crucial, as it concerns an indirect method of investing in gold through the stocks of companies that mine it, offering an interesting alternative to investing in physical gold but not necessarily to the traditional stock market as the authors assume that gold mining stocks might perform significantly differently from the stock market in a broad sense. the mentioned assumption is well argued by studies that relate to the relationship between the price of gold and gold mining stocks return, for example, studies mentioned in the literature (Blose and shieh 1995;tufano 1998;twite 2002;Faff and Hillier 2004;Fang et al 2007;johnson and Lamdin 2015;szczygielski et al 2018). According to the regression analysis, gold mining stocks have greater exposure to gold price returns than stock market returns.…”

Volatility Factors of Returns and Risk Analysis Using Quantile Risk Measures in the Gold and Silver Market

“…These results have important implications for the role of these metals as investment assets. Szczygielski, Enslin, and du Toit (2018) investigate whether an investment in gold mining stocks provides gold price-linked safe haven benefits to investors in an emerging economy. The results indicate that there is a strong, yet changing, relationship between gold price, dollar exchange rate and gold mining returns.…”

The Importance of Gold’s Effect on Investment and Predicting the World Gold Price Using the ARIMA and ARIMA-GARCH Model

“…For example, artificial intelligence and machine learning algorithms can process vast amounts of data and identify complex patterns that humans may overlook. By incorporating these cutting-edge technologies into gold price forecasting, analysts can enhance the accuracy and reliability of their predictions [31][32][33].…”