Sino-American relations and gold market volatility

Bangzheng Wu

Finance Research Letters, 2025, vol. 80, issue C

Abstract: This study investigates the impact of Sino-American tensions, as captured by the U.S.‒China Tension (UCT) index, on international gold price volatility. Bivariate GARCH-MIDAS-UCT models were employed in this study, and the findings reveal that UCT significantly amplifies gold price volatility, surpassing the effects of traditional indicators such as economic policy uncertainty and geopolitical risk. Moreover, global uncertainty indices exert a stronger influence on gold volatility than do domestic factors. The model's out-of-sample predictive performance further validates the robustness of the use of the UCT in forecasting gold price volatility. These findings highlight the critical role of Sino-American tensions in predicting gold market volatility, providing valuable insights for investors in managing risk amidst geopolitical instability.

Keywords: Volatility forecasting; U.S.‒China tensions; Gold market (search for similar items in EconPapers)
JEL-codes: C22 C53 Q43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006397

DOI: 10.1016/j.frl.2025.107379

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