Does uncertainty move the gold price? New evidence from a nonparametric causality-in-quantiles test

Balcılar, Mehmet; Gupta, Rangan; Pierdzioch, Christian

doi:10.1016/j.resourpol.2016.04.004

“…Interestingly, as documented by the previous studies on the same issue, we show that the different uncertainty measures display heterogenuous impacts on gold returns (for example, Blose, 2010; Jones and Sackley, 2016;Balcilar et al 2016;Beckmann et al 2017). Fig 2 (a) reports the estimate of the gold return's reaction to the macroeconomic uncertainty.…”

Section: 1the Quantile-on Quantile Resultssupporting

confidence: 77%

“…They showed that uncertain economic policies prompt a moderate correlation, while a strong correlation is associated with certain economic policies. Balcilar et al (2016) tested the role of economic, macroeconomic and financial uncertainty in determining gold returns and volatility, and found that macroeconomic and financial uncertainties play a vital role in explaining gold price dynamics.…”

Section: Introductionmentioning

confidence: 99%

“…They found that the political uncertainty exerts a statistically negative influence on commodity prices (in particular, gold prices). Interestingly, the empirical works that compare the impacts of several uncertainty measures on gold returns are very scarce, 3 and showed wide differences in their effect on gold price dynamics (for instance, Balcilar et al, 2016;Beckmann et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

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Measuring the response of gold prices to uncertainty: An analysis beyond the mean

Bouoiyour

¹

,

Selmi

²

,

Wohar

³

2018

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This paper provides an innovative perspective on the role of gold as a hedge and safe haven. We use a quantile-on-quantile regression approach to capture the dependence structure between gold returns and changes in uncertainty under different gold market conditions, while considering the nuances of uncertainty levels. To capture the core uncertainty effects on gold returns, a dynamic factor model is used. This technique allows summarizing the impact of six different indexes (namely economic, macroeconomic, microeconomic, monetary policy, financial and political uncertainties) within one aggregate measure of uncertainty. In doing so, we show that the gold's role as a hedge and safe haven cannot be assumed to hold at all times. This ability seems to be sensitive to the gold's various market states (bearish, normal or bullish) and to whether the uncertainty is low, middle or high. Interestingly, we find a positive and strong relationship between gold returns and the uncertainty composite indicator when the uncertainty attains its highest level and under normal gold market scenario. This suggests that holding a diversified portfolio composed of gold could help protecting against exposure to uncertain risks. Acknowledgement: The authors would like to thank the editor Sushanta Mallick and the two anonymous Reviewers for helpful and insightful comments and suggestions on an earlier version of this article. Highlights We examine the response of gold returns to different uncertainty indicators. We use a quantile-on-quantile regression model.  We develop an uncertainty composite indicator based on six uncertainty factors. The hedge and safe haven ability of gold is conditional on gold market states. The gold's role as a hedge and safe haven depends on the nuances of uncertainty.

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“…Theoretically, a US oil supply shock directly influences US income, 1 A considerable literature has developed examining the connection between indices of economic policy uncertainty and stock markets in various countries: Mensi et al (2014) for BRICS; Arouri and Roubaud (2016) for the US and China; Li et al (2016) for China and India; Dakhlaoui and Aloui (2016) for BRIC over time; Gao and Zhang (2016) for the UK; Wu et al (2016) for a panel of nine countries ;and Chang et al (2015) for seven OECD countries. The implications of economic policy uncertainty for sectoral returns has also been examined: Lean and Nguyen (2014) for sustainable investment returns in Asia Pacific and North America; Antonakakis et al (2016) for U.S. sustainable investments; Balcilar et al (2016) for gold returns and volatility; Kang et al (2017) global oil and gas companies. Bekiros et al (2016) argue for a non-linear forecasting connection between economic policy uncertainty stock market return volatility.…”

Section: Oil Price Shocks and Policy Uncertainty: New Evidence On Thementioning

confidence: 99%

Oil Price Shocks and Policy Uncertainty: New Evidence on the Effects of US and non-US Oil Production

Kang

¹

,

Ratti

²

,

Vespignani

³

2017

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Important interaction has been established for US economic policy uncertainty with a number of economic and financial variables including oil prices. This paper examines the dynamic effects of US and non-US oil production shocks on economic policy uncertainty using a structural VAR model. Such an examination is motivated by the substantial increases in US oil production in recent years with implications for US political and economic security. Positive innovations in US oil production are associated with decreases in US economic policy uncertainty. The economic forecast interquartile ranges about the US CPI and about federal/state/local government expenditures are particularly sensitive to innovations in US oil supply shocks. Shocks to US oil supply disruption causes rises in the CPI forecast uncertainty and accounts for 21% of the overall variation of the CPI forecaster disagreement. Dis-aggregation of oil production shocks into US and non-US oil production yield novel results. Oil supply shocks identified by US and non-US origins explain as much of the variation in economic policy uncertainty as structural shocks on the demand side of the oil market.

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“…The implications of economic policy uncertainty for sectoral returns has also been examined: Lean and Nguyen (2014) for sustainable investment returns in Asia Pacific and North America; Antonakakis et al (2016) for U.S. sustainable investments; Balcilar et al (2016) for gold returns and volatility; Kang et al (2017) global oil and gas companies. Bekiros et al (2016) argue for a non-linear forecasting connection between economic policy uncertainty stock market return volatility.…”

Section: Oil Price Shocks and Policy Uncertainty: New Evidence On Thementioning

confidence: 99%

Oil Price Shocks and Policy Uncertainty: New Evidence on the Effects of US and Non-US Oil Production

Kang

¹

,

Ratti

²

,

Vespignani

³

2017

View full text Add to dashboard Cite

Important interaction has been established for US economic policy uncertainty with a number of economic and financial variables including oil prices. This paper examines the dynamic effects of US and non-US oil production shocks on economic policy uncertainty using a structural VAR model. Such an examination is motivated by the substantial increases in US oil production in recent years with implications for US political and economic security. Positive innovations in US oil production are associated with decreases in US economic policy uncertainty. The economic forecast interquartile ranges about the US CPI and about federal/state/local government expenditures are particularly sensitive to innovations in US oil supply shocks. Shocks to US oil supply disruption causes rises in the CPI forecast uncertainty and accounts for 21% of the overall variation of the CPI forecaster disagreement. Dis-aggregation of oil production shocks into US and non-US oil production yield novel results. Oil supply shocks identified by US and non-US origins explain as much of the variation in economic policy uncertainty as structural shocks on the demand side of the oil market.JEL classification: E44, G12, Q43

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Does uncertainty move the gold price? New evidence from a nonparametric causality-in-quantiles test

Cited by 234 publications

References 25 publications

Measuring the response of gold prices to uncertainty: An analysis beyond the mean

Measuring the response of gold prices to uncertainty: An analysis beyond the mean

Oil Price Shocks and Policy Uncertainty: New Evidence on the Effects of US and non-US Oil Production

Oil Price Shocks and Policy Uncertainty: New Evidence on the Effects of US and Non-US Oil Production

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