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The Price of Gold and the Exchange Rates: Once Again

By Larry A. Sjaastad


This paper examines the theoretical and empirical relationships between the major exchange rates and the price of gold using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods international monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market now seems to be dominated by the U.S. dollar bloc, appreciations or depreciations of that dollar would have strong effects on the price of gold in other currencies. The results of this study are rather different from those obtained in an earlier study of the same subject.

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