Are gold and cryptocurrency a safe haven for stocks and bonds? Conventional vs Islamic markets during the COVID-19 pandemic

Abstract

PurposeThis study aims to identify the ability of gold and cryptocurrency (Cryptocurrency Uncertainty Index (UCRY) Price) as safe haven assets (SHA) for stocks and bonds in both conventional (i.e. stock indices and government bonds) and Islamic markets (i.e. Islamic stock indices and Islamic bonds (IB)).Design/methodology/approachThe authors employed the nonadditive panel quantile regression model by Powell (2016). It measured the safe haven characteristics of gold and UCRY Price for stock indices, government bonds, Islamic stocks, and IB under gold circumstances and level of cryptocurrency uncertainty, respectively. The period spanned from 11 March 2020 to 31 December 2021.FindingsThis study discovered three findings, including: (1) gold is a strong safe haven for stocks and bonds in conventional and Islamic markets under bearish conditions; (2) UCRY Price is a strong safe haven for conventional stocks and bonds but only a weak safe haven for Islamic stocks under high crypto uncertainty; and (3) gold offers a safe haven in both emerging and developed countries, while UCRY Price provides a better safe haven in developed than in emerging countries.Practical implicationsGold always wins big for safe haven properties during unstable economy. It can also win over investors who consider shariah compliant products. Therefore, it should be included in an investor's portfolio. Meanwhile, cryptocurrencies are more common for developed countries. Thus, the governments and regulators of emerging countries need to provide more guidance around cryptocurrency so that the societies have better literacy. On top of that, the investors can consider crypto to mitigate risks but with limited safe haven functions.Originality/valueThe originality aspects of this study include: (1) four chosen assets from conventional and Islamic markets altogether (i.e. stock indices, government bonds, Islamic stock indices and IB); (2) indicator countries selected based on the most used and owned cryptocurrencies for the SHA study; and (3) the utilization of UCRY Price as a crypto indicator and a further examination of the SHA study toward four financial assets.

Connectedness Between Gold-Backed Cryptocurrencies and the G7 Stock Market Indices During Global Crises: Evidence From the Quantile Vector Autoregression Approach

“…The study's total net directional connectedness framework showcases the resilience of gold-backed cryptocurrencies, particularly DGX, as safe havens within investment portfolios. Our findings contradict those of Jalan et al (2021), Widjaja et al (2023), and Kołodziejczyk (2023) who suggest that gold-backed crypto assets are not as reliable as real gold in fulfilling the role of a safe-haven asset, and that they may be vulnerable to volatility transmitted from gold markets. However, our results are in line with those of Ali et al (2022), Syuhada et al (2022), Trichilli and Boujelbéne (2023), Ali et al (2024), Maouchi et al (2024), andBelguith et al (2024) who support the safe haven ability of gold-backed cryptocurrencies.…”

“…On the other hand, several studies disputed goldbacked cryptocurrencies' safe haven performance and stated that they are vulnerable to volatility originating from gold markets (Aloui et al, 2021;Díaz et al, 2022;Jalan et al, 2021;Kołodziejczyk, 2023;Nugroho, 2021;Widjaja et al, 2023). In this regard, Adzimatinur et al (2021) assess the risk and volatility inherent in goldbacked cryptocurrencies in comparison to conventional cryptocurrencies and financial assets.…”

Analisis Aset Safe-Haven Untuk Pasar Saham Di Indonesia : Studi Pada Emas Dan Bitcoin

“…Sejumlah literatur secara empiris menyelidiki apakah emas dapat bertindak sebagai aset safe haven, namun hasil yang diberikan cukup beragam. Dalam penelitiannya, (Widjaja et al, 2023) menemukan bahwa emas dapat di gunakan sebagai aset safe haven untuk pasar saham konvensional dan pasar saham syariah, dimana hal ini disebabkan karena emas lebih diminati karena merupakan aset yang relatif stabil disaat terjadinya krisis. Selain itu, (Wen et al, 2022) Hal ini mengindikasikan bahwa beberapa aset seperti emas dapat kehilangan status safe haven selama terjadinya kondisi pasar yang ekstrim.…”

“…Sebelumnya, penelitian mengenai aset safe haven emas dan bitcoin telah banyak dilakukan. Misalnya, penelitian yang dilakukan (Widjaja et al, 2023) menemukan jika emas adalah aset safe haven yang kuat bagi pasar saham konvensional maupun syariah.…”