THE EFFECT OF INDEBTEDNESS IN THE U.S. ECONOMY ON GOLD PRICES

This article empirically analyzes the relationship between the global gold price changes and the U.S. Federal Debt, along with Baltic Dry Index (BDI). Based on the data between 1988 and 2012, the ARDL Bounds cointegration analysis indicates that the global gold prices are significantly and positively related with U.S. Federal Debt both in short and long term, while it is positively yet much less significantly related with Baltic Dry Index BDI only in the short term. In addition, Toda-Yamamoto Granger Causality Test indicates one-way causality from gold prices to U.S. Federal Debt. In sum, the global gold prices increases while the economic situation in the U.S. worsens. This study provides new empirical evidence as to how the economic condition of the U.S. affects the global economy.