The threshold effect of market sentiment and inflation expectations on gold price

Although it is theoretically well established that market sentiment and inflation expectations influence gold price, limited research considers whether such effects vary depending upon the levels of market sentiment and inflation expectations. This paper addresses this gap by examining whether a threshold effect exists in the focal relationships. The results show that both market sentiment and inflation expectations significantly influence gold price only when their levels are beyond a certain threshold. However, market sentiment has a threshold effect only for the period after, rather than before, the global financial crisis. By contrast, a threshold effect is observed for inflation expectations in both before and after the global financial crisis periods. These findings advance our understanding of the effects of market sentiment and inflation expectations on gold price.