Precious metals market in the new millennium

Abstract

In the ever-changing investment environment it is not easy to find a relatively safe investment option. That is the reason why a large part of investors (respective both, the financial science as well as the financial practice) is increasingly concerned with the benefits and risks of investing into precious metals. The aim of this paper was to find out how the prices of gold, silver, platinum and palladium have been behaving in the last 15 years, from January 2001 to December 2015. The prices of selected precious metals, their cross-correlation and their volatility in the last millennium as well as the relation of precious metals prices to S&P 500 index values have been analyzed. The method of correlation analysis has been used as the main research method. Our findings showed that despite the fact that some of the precious metals seemed to be a good choice as a profitable investment none of them have been a good choice for investment diversification, neither with each other nor with the S&P 500 index that represented the stock market. The precious metals can be easily used as a form of financial investments. Unlike S&P 500 index or some other underlying assets the precious metals (especially gold) are financial instruments that are liquid in any part of the world.

© 2016 The Authors. Published by Elsevier B.V.

Peer-review under responsibility of Academic World Research and Education Center.

Keywords: precious metals; S&P 500 index; price correlations; standard deviation; new millennium;