Gold, silver, and the US dollar as harbingers of financial calm and distress

Sel Dibooglu, Emrah Çevik and Max Gillman

The Quarterly Review of Economics and Finance, 2022, vol. 86, issue C, 200-210

Abstract: In this paper, we investigate the relationship between gold, silver, and the US dollar returns and financial stress to shed light on the circumstances where these assets serve as attractive investment vehicles and whether the assets signal financial conditions ahead. Using weekly data from 1994 to 2020 and predictability-in-mean, predictability-in-variance, and predictability-in-distribution, we examine the relationship between returns on gold, silver, and the US dollar and the St Louis Financial Stress Index (STLFSI). While we find no Granger predictability in the mean between gold returns and the aggregate STLFSI, there is some evidence of Granger predictability between silver and US dollar returns and financial stress. However, test results show significant bidirectional Granger predictability in variance between STLFSI and gold, silver, and US dollar returns. Predictability-in-distribution tests generally show significant bidirectional relationships between financial stress and gold, silver, and US dollar returns at the left and right tail of the distribution. We confirm the safe-haven properties of gold, silver, and the US dollar and find novel evidence that very low returns on these assets signal financial calm, and unusually high returns signal high financial stress ahead. In this sense, extreme gold, silver, and US dollar returns are harbingers of calm times or financial distress to come, acting as early financial market news providing risk guideposts for safety.

Keywords: Safe-haven; Gold returns; Silver returns, US dollar; Financial stress; Financial stability (search for similar items in EconPapers)
JEL-codes: G10 G11 G17 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976922000813
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:86:y:2022:i:c:p:200-210

DOI: 10.1016/j.qref.2022.07.003

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().