Hedge and safe haven functions of gold and Bitcoin around COVID-19: evidence from U.S. financial assets

Qiuying Cheng, Xinyu Wang, Zhuqing Wang and Song Shi

Applied Economics, 2025, vol. 57, issue 46, 7558-7579

Abstract: The COVID-19 outbreak triggered an unparalleled health crisis and financial shock. We re-examine whether gold and Bitcoin can function as hedges and safe havens for U.S. financial assets before and after the COVID-19 outbreak. This study employs the quantile-on-quantile and causality-in-quantiles methods to detect the nonlinear and asymmetric relationship of gold and Bitcoin with U.S. financial assets. The results reveal negative dependence of the U.S. dollar, real estate, crude oil, and natural gas on gold and Bitcoin in some quantiles during both periods, indicating that gold and Bitcoin are hedges for these four assets. Following the COVID-19 outbreak, the negative correlations that exist for stock and clean energy with Bitcoin almost all turn positive, gold and Bitcoin lose their ability to hedge stocks and clean energy. Bitcoin can still hedge bonds in middle and high quantiles, whereas gold does not possess this capability against the bond. Additionally, there is an asymmetric causality in the mean and variance from U.S. financial assets to gold and Bitcoin, which generally exists in the middle quantiles but not in the extreme (high and low) quantiles. Our findings provide clear guidelines to market participants on risk management and policy decisions according to market conditions.

Date: 2025
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DOI: 10.1080/00036846.2024.2393454

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