Gold – a hedge, safe haven or a diversifier - A comparison between the Swedish and the American financial market

Abstract

The purpose of this study is to investigate the role of gold as a financial asset and comparing the result between the American and the Swedish financial market. Using time series data for monthly and daily returns of S&P500, OMXS30, American 10-year bonds, Swedish 10-year bonds, oil and gold this study analyzes if gold has been a hedge, safe have or a diversifier for Swedish and American stocks and bonds the last 20 years. This thesis constructed an efficient portfolio with regards to maximizing the Sharpe to see if gold has improved financial portfolios during the last 20 years. We investigated 4 different time periods, 1999-2019, 1999-2009, 2009-2019 and 2007-2009. Gold was found to be a hedge against both American and Swedish bonds. Gold was a safe haven for American stocks and Swedish bonds. Gold was also found to be a diversifier for American and Swedish stocks and bonds in times of financial turmoil. This thesis also finds that gold is a forward hedge for American stocks, American bonds and Swedish bonds. However, the result is not consistent over all periods. In the efficient portfolios, gold had a major allocation in every portfolio with the lowest allocation of 52.51%. This thesis can conclude that gold is an attractive financial asset for both American and Swedish investors even though its function as a safe haven, hedge or diversifier is not consistent.