Climate Risks and Real Gold Returns over 750 Years

Rangan Gupta, Anandamayee Majumdar, Christian Pierdzioch and Onur Polat
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Anandamayee Majumdar: Department of Mathematics, San Francisco State University, San Francisco, CA 94132, USA
Onur Polat: Department of Public Finance, Bilecik Şeyh Edebali University, 11230 Bilecik, Türkiye

Forecasting, 2024, vol. 6, issue 4, 1-16

Abstract: Using data that cover the annual period from 1258 to 2023, we studied the link between real gold returns and climate risks. We documented a positive contemporaneous link and a negative predictive link. Our findings further show that the predictive link historically gave rise to significant out-of-sample forecasting gains. The positive contemporaneous link is consistent with the view that investors viewed gold as a safe haven in times of elevated climate risks. The negative predictive link, in turn, is consistent with an overshooting scenario in which the real gold price overshot in response to climate risks, only to return subsequently to a lower value. Our findings should provide important implications for investors and policymakers, given that our analysis covered the longest possible data sample involving the gold market, and hence, was independent of any sample selection bias.

Keywords: gold returns; climate risks; forecasting; overshooting (search for similar items in EconPapers)
JEL-codes: A1 B4 C0 C1 C2 C3 C4 C5 C8 M0 Q2 Q3 Q4 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Climate Risks and Real Gold Returns over 750 Years (2024)
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