Can gold act as a hedge against inflation? Evidence from Iraq

This study investigates the relationship between gold returns and the inflation in Iraq. Monthly data spanning the period from January 2007 to December 2015 were used. Analysis was done by using the Autoregressive Distributed Lag Model (ARDL) (Pesaran et al., 2001). The results show that there is no relationship between gold returns and inflation in the long run, but there is one in the short run. Specifically, the results from the error correction representation of the model indicate that 90.66 percent of the disequilibrium is corrected within one month. Results obtained by using the Toda-Yamamoto approach to causality show evidence of two-way Granger Causality between gold returns to inflation rate.