Is the price of gold too high? In their May 2024 paper entitled "Is There Still a Golden Dilemma?", Claude Erb and Campbell Harvey revisit their golden dilemma, the tug of war between dueling ideas:
- A high price for gold today presages low future return.
- The higher the price of gold today, the rosier its future.
The focus on inflation and gold demand as potential key drivers of gold price behavior. Using monthly data for the U.S. consumer price index (CPI) and for gold demand indicators such as exchange-traded fund (ETF) and central bank gold holdings during January 1975 (when high-quality gold data becomes available) through March 2024, they find that:
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