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Abstract

Although gold has been around for thousands of years, its role in diversified portfolios is not well understood. The authors critically examined such popular stories as “gold is an inflation hedge.” Investors face the following dilemma: The real price of gold is historically very high and may revert to the mean, but if prominent emerging markets increase their gold holdings, the real price of gold may rise even further from today’s elevated levels.

About the Author(s)

Claude B. Erb CFA

Claude Erb, CFA, is in Los Angeles, California.

Campbell Harvey
Campbell R. Harvey

Campbell R. Harvey is Professor of Finance at the Fuqua School of Business, Duke University, and a Research Associate of the National Bureau of Economic Research in Cambridge, Massachusetts. He is President of the American Finance Association.