THE PRICE OF GOLD AND THE EXCHANGE-RATE

This paper examines the theoretical relationship between the major exc hange rates and the prices of internationally-traded commodities. In t he empirical section, the case of gold is analyzed using forecast erro r data. Among other things, it is found that, since the dissolution of the Bretton Woods International monetary system, floating exchange ra tes among the major currencies have been a major source of price insta bility in the world gold market and, as the world gold market is domin ated by the European currency bloc, appreciations or depreciations of European currencies have strong effects on the price of gold in other currencies. (JEL D40, F33). Copyright (C) 1996 Elsevier Science Ltd.