Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data

Boubaker, Heni; Cuñado, Juncal; Gil-Alana, Luís A.; Gupta, Rangan

doi:10.1016/j.physa.2019.123093

Cited by 47 publications

(26 citation statements)

References 22 publications

(15 reference statements)

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“…The results from the Markov switching model indicate gold returns have high probability of staying in the first volatility than the second volatility regime. The rise in gold price reflects investor uncertainty in the market, however, gold is a stronger hedge commodity in global financial crises or risks, especially when gold market is performing and trading at higher prices ( Boubaker et al, 2020 ). Our findings are consistent with studies that suggest crisis tend to negatively affect gold price, but to lesser extent, compared to similar safe-haven precious metal ( Huang and Kilic, 2019 ).…”

Section: Resultsmentioning

confidence: 99%

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

Ahmed

Sarkodıe

2021

Resources Policy

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This paper investigates the switching effect of COVID-19 pandemic and economic policy uncertainty on commodity prices. We employ Markov regime-switching dynamic model to explore price regime dynamics of eight widely traded commodities namely oil, natural gas, corn, soybeans, silver, gold, copper, and steel. We fit two Markov switching regimes to allow parameters to respond to both low and high volatilities. The empirical evidence shows oil, natural gas, corn, soybean, silver, gold, copper, and steel returns adjust to shocks in COVID-19 outcomes and economic policy uncertainty at varying degrees––in both low volatility and high volatility regimes. In contrast, oil and natural gas do not respond to changes in COVID-19 deaths in both regimes. The findings show most commodities are responsive to historical price in terms of demand and supply in both volatility regimes. Our findings further show a high probability that commodity prices will remain in low volatility regime than in high volatility regime––owing to COVID-19-attributed market uncertainties. These findings are useful to both investors and policymakers––as precious metals and agricultural commodities show less negative response to exogenous variables. Thus, investors and portfolio managers could use precious metals, viz. Gold for short-term cover against systematic risks in the market during the period of global pandemic.

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Section: Resultsmentioning

confidence: 99%

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

Ahmed

Sarkodıe

2021

Resources Policy

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“…The major shortcoming of these studies is their focus on a specific crisis, such as the financial/stock market crisis (Ciner et al, 2013;Gutiérrez et al, 2013;Dee et al, 2013;He, et al, 2018;Iqbal, 2017;, debt crisis (Agyei-Ampomah et al, 2014;Bredin et al, 2015;Boubaker et al, 2020), exchange rate crisis (Joy, 2011;Reboredo, 2013b;2014a and b;Qureshi et al, 2018;Bedoui et al, 2019). Some studies have also focused on non-crisis uncertainty such as economic uncertainty (Hood andMalik, 2013 andWu et al, 2019), and commodity price shock (Reboredo, 2013a;Salisu and Adeniran, 2020).…”

Section: Motivationmentioning

confidence: 99%

Assessing the safe haven property of the gold market during COVID-19 pandemic

Salisu

Raheem

2021

International Review of Financial Analysis

105

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This study examines the safe haven prowess of gold against some exogenous shocks due to the COVID-19 pandemic. We further make a comparison of our findings with those obtained for the period before it. Our results confirm the potential of gold market to serve as a safe haven during the pandemic albeit with a higher effectiveness before the pandemic. Further results suggest that gold consistently offers better safe haven properties than the US stocks as well as other precious metals like Silver, Palladium and Platinum regardless of the period. Finally, we find that the predictive model that accounts for uncertainties outperforms the benchmark model that ignores the same both for the in-and out-of-sample forecast analyses.

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“…It is also interesting to study whether the evidence we have reported in this research extends to markets for other natural resources. In this regard, the link between climate-risk factors and the volatility of movements of prices of important agricultural commodities is particularly important, as might also be the case of precious metals which have been considered as traditional safe-havens in the wake of global risks and uncertainties [57]. We hope that our research will set the stage for such future empirical analyses.…”

Section: Implications For Economic Agentsmentioning

confidence: 93%

Climate Risks and the Realized Volatility Oil and Gas Prices: Results of an Out-of-Sample Forecasting Experiment

Gupta

Pierdzioch

2021

Energies

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We extend the widely-studied Heterogeneous Autoregressive Realized Volatility (HAR-RV) model to examine the out-of-sample forecasting value of climate-risk factors for the realized volatility of movements of the prices of crude oil, heating oil, and natural gas. The climate-risk factors have been constructed in recent literature using techniques of computational linguistics, and consist of daily proxies of physical (natural disasters and global warming) and transition (U.S. climate policy and international summits) risks involving the climate. We find that climate-risk factors contribute to out-of-sample forecasting performance mainly at a monthly and, in some cases, also at a weekly forecast horizon. We demonstrate that our main finding is robust to various modifications of our forecasting experiment, and to using three different popular shrinkage estimators to estimate the extended HAR-RV model. We also study longer forecast horizons of up to three months, and we account for the possibility that policymakers and forecasters may have an asymmetric loss function.

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Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data

Cited by 47 publications

References 22 publications

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility

Assessing the safe haven property of the gold market during COVID-19 pandemic

Climate Risks and the Realized Volatility Oil and Gas Prices: Results of an Out-of-Sample Forecasting Experiment

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