Flight to Quality - Gold Mining Shares versus Gold Bullion

This paper uses the co-movement of gold mining shares with the price of gold to assess the strength of flight to quality by distinguishing between flight to physical gold and flight to gold mining company shares. The analysis of a global sample of gold mining companies reveals that flights to quality are very different across financial shocks with the bankruptcy of Lehman Brothers and the Brexit vote being the most extreme at opposite ends of the spectrum. We also find evidence that a flight from gold mining shares to gold leads to a stronger price reaction and thus to a stronger safe haven effect of gold bullion. The analysis demonstrates that gold mining companies can enrich our understanding of the flight to quality phenomenon.