Gold price dynamics and the role of uncertainty

Beckmann, Joscha; Berger, Theo; Czudaj, Robert

doi:10.1080/14697688.2018.1508879

Cited by 98 publications

(52 citation statements)

References 32 publications

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“…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: 76%

“…Previous empirical studies documented that the linkage between gold and other assets changes noticeably in times of market stress or turmoil (Hartmann et al 2004;Baur and McDermott, 2010;Baur and Lucey, 2010;Wang et al, 2011;Miyazaki et al, 2012;Ciner et al 2013;Mensi et al, 2013;Reboredo, 2013;Wang and Chueh, 2013;Arouri et al, 2015;Bampinas and Panagiotidi, 2015;Beckmann et al, 2015;Nguyen et al, 2016;Van Hoang et al, 2016, among others). Although the empirical literature on the dependence between gold prices and other assets is increasing remarkably, Beckmann et al (2017) suggested that the traditional and the well-known view on hedge and safe haven properties of gold can be misleading and that it seems more relevant to directly assess the dependence between gold and uncertainty.…”

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

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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Section: 1the Quantile-on Quantile Resultssupporting

confidence: 76%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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

2018

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“…The positive gold shocks may increase the probability of being in the high-uncertainty regime (Zhou et al, 2017). In general, there is a mutual influence between GEPU and GP (Balcilar et al, 2016;Raza et al, 2018;Beckmann et al, 2019). According to this mutual influence, it assists the governments to forecast and stabilize the global economy, based on the price of gold, and it also inspires the investors to hedge risks of GEPU, by rationally arranging assets.…”

Section: Introductionmentioning

confidence: 99%

Should Gold Be Held Under Global Economic Policy Uncertainty?

Qin

Xiao

et al. 2020

Journal of Business Economics and Management

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This paper investigates the ability of gold to hedge worldwide risks from the perspective of global economic policy uncertainty (GEPU). By applying the full- and sub-sample rolling-window bootstrap causality tests to analyze the dynamic interaction between GEPU and gold price (GP). It can be observed that gold can effectively hedge risks of GEPU during the Asian financial crisis, dot-com bubble and global economic crisis, but this result does not hold in non-crisis period. GEPU manifests two-way impacts on the GP in a few periods, this relationship between GEPU and GP being consistent with the hypothesis in the general equilibrium model, which states that changes in GEPU lead to the fluctuations of GP. In turn, GP has both positive and negative impacts on GEPU. In the current complex economic situation, governments and investors can consider gold to hedge risks of GEPU, especially during the economic crises.

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“…Introduction There exists a large literature that has looked into the "safe haven" status of gold relative to stock, bond and currency markets (see for example, Baur and Lucey (2010), Baur and McDermott (2010), Reboredo (2013a), Agyei-Ampomah et al, (2014), Gürgün and Ünalmis (2014), Beckmann et al, (2015)), as well as oil prices (Reboredo, 2013b;Tiwari et al, 2019). More recently, studies have also analyzed the role of economic uncertainty and geopolitical risks, i.e., non-financial indicators, as drivers of gold prices in the context of its safe haven property (see for example, Baur and Smales (2018), Bouoiyour et al, (2018), Beckmann et al, (2019)).…”

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confidence: 99%

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

Boubaker

Cuñado

Gil-Alana

et al. 2020

Physica A: Statistical Mechanics and its Applications

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Using annual data spanning the period of 1258-2018, we test the safe haven characteristic of gold in the wake of global crises. We find that, when we allow for regime-switching to capture nonlinearity and structural breaks, gold serves as a strong hedge against crises, especially during the bullish regime of the market, and in particular from the post-World War I period, as suggested by a time-varying model. In comparison, silver, however, does not seem to possess the safe haven property over the historical period of 1688-2018. Finally, we also find that global crises can accurately predict real gold returns over a long-span (1302-2018) out-of-sample period.

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Gold price dynamics and the role of uncertainty

Cited by 98 publications

References 32 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

Should Gold Be Held Under Global Economic Policy Uncertainty?

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

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