The Australian dollar and gold prices

This paper explores the association between the nominal/real exchange rate between the Australian dollar against the US dollar and gold prices, using daily data spanning the period 2000-2011. Through the Error Correction Model and the Generalized Autoregressive Heteroskedastic (GARCH) approach, the empirical findings provide evidence in favor of a relationship between the exchange rate and gold prices, in terms of both means and conditional volatilities. The results are important, in terms of information availability, for monetary policymakers, hedge funds managers and international portfolio managers. Moreover, they provide additional support to the hypothesis that both markets are driven by the same information set. -- gold prices ; Australian dollar/US dollar exchange rate ; error correction model ; GARCH model.