The Role of Global Economic Conditions in Forecasting Gold Market Volatility: Evidence from a GARCH-MIDAS Approach

Afees Salisu, Rangan Gupta, Elie Bouri (elie.elbouri@lau.edu.lb) and Qiang Ji

No 202043, Working Papers from University of Pretoria, Department of Economics

Abstract: In this study, we examine the role of global economic conditions in forecasting gold market volatility using alternative measures. Based on the available data frequency for the relevant series, we adopt the GARCH-MIDAS approach which allows for mixed data frequencies. We find that global economic conditions contribute significantly to gold market volatility albeit with mixed outcomes. While the results lend support to the safe-haven properties of the gold market, the outcome is influenced by the choice of measure of global economic conditions. For completeness, we extend the analyses to other precious metals such as silver, platinum, palladium, and rhodium and find that global economic conditions forecast the volatility of gold returns better than other precious metals. Our results are robust to multiple forecast horizons and offer useful insights into plausible investment choices in the precious metals market.

Keywords: Precious Metals Volatility; Global Economic Conditions; Mixed-Frequency (search for similar items in EconPapers)
JEL-codes: C32 C53 E32 Q02 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2020-05
New Economics Papers: this item is included in nep-for, nep-int, nep-mac, nep-rmg and nep-sea
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Citations: View citations in EconPapers (28)

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Journal Article: The role of global economic conditions in forecasting gold market volatility: Evidence from a GARCH-MIDAS approach (2020)
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