Abstract
This study was motivated by the interest in structured products and the attempt to construct a structured product using gold and silver, and first step to that problem is the observation of co-integration between gold and silver prices. This paper analyzes the long-run relationship between gold and silver spot prices (daily and monthly). First, five year period of daily gold and silver prices from 2010 to 2014 is observed. Second, 20 year period of monthly gold and silver prices from 1994 to 2014 is observed. The existence and stability of a long-run relationship between gold and silver prices is examined in both cases. This work shows that during 2010-2014 there is no co-integration between the gold and silver prices which coincides with the former research of Escribano and Granger (1998) since 2010-2014 was a “normal” period without any bubbles, hence, VAR was used as a tool of estimation. After this since monthly data from 1994 to 2014 shows that gold and silver are co-integrated, which means there is a long-run association between gold and silver prices: VEC was used to estimate the relationship.
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