Extreme Value Theory and Gold Price Extremes, 1975–2025: Long-Term Evidence on Value-at-Risk and Expected Shortfall

Michael Bloss, Dietmar Ernst () and Leander Geisinger
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Michael Bloss: International School of Finance (ISF), Nuertingen-Geislingen University, Sigmaringer Straße 25, 72622 Nuertingen, Germany
Dietmar Ernst: International School of Finance (ISF), Nuertingen-Geislingen University, Sigmaringer Straße 25, 72622 Nuertingen, Germany
Leander Geisinger: International School of Finance (ISF), Nuertingen-Geislingen University, Sigmaringer Straße 25, 72622 Nuertingen, Germany

Commodities, 2025, vol. 4, issue 4, 1-35

Abstract: We analyze extreme gold price movements between 1975 and 2025 using Extreme Value Theory (EVT). Using both the Block-Maxima and Peaks-over-Threshold approaches on a daily return basis, we estimate Value-at-Risk (VaR) and Expected Shortfall (ES) for the entire distribution focusing on a long-term view. Our results demonstrate that models based on the standard normal distribution systematically underestimate extreme risks, whereas EVT provides more reliable measures. In particular, EVT captures not only rare losses, but also sudden positive rallies, highlighting gold’s dual function as a risk and opportunity asset. Asymmetries emerge in the analysis: at the 0.99 quantile, losses appear larger in absolute value than gains. At the 0.995 quantile, in some episodes, upside extremes dominate. Furthermore, we find that geopolitical and economic shocks, including the oil crises, the 2008 financial crisis, and the COVD-19 pandemic, leave distinct signatures in the extremes. By covering five decades, our study provides the most extensive EVT-based assessment of gold risks to date. Our findings contribute to debates on financial stability and provide practical guidance for investors seeking to manage tail risks while recognizing gold’s potential as both a safe haven and a speculative asset.

Keywords: gold; extreme value theory (EVT); value-at-risk (VaR); expected shortfall (ES) (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2025
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