Can gold hedge and preserve value when the US dollar depreciates?

This paper examines gold's hedging and value-preserving properties against fluctuations in the US dollar. We propose a likelihood ratio test that draws a distinction between hedging and safe-haven characteristics on the basis of the conditional dependence structure under different market conditions. Our evidence, based on an analysis of data for US dollar exchange rates with a broad set of currencies, indicates that gold can serve as a hedge against US dollar depreciation but is a weak safe haven against extreme US dollar movements. These results have implications for risk management and hedging strategies.