The Volatility Spillover Between Global Crude Oil and Gold Market: Evidence from Wavelet Coherence and Cross-power Spectrum Models

I. Sahadudheen () and P. K. Santhosh Kumar ()
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I. Sahadudheen: Farook College
P. K. Santhosh Kumar: Cochin University of Science and Technology

Computational Economics, 2025, vol. 66, issue 4, No 13, 3063-3080

Abstract: Abstract This article investigates the volatility spillover between crude oil and gold markets, addressing inconsistencies in existing literature. While some studies report significant spillover effects, especially during key events and crises, others find minimal impact, highlighting a research gap in understanding the conditions governing these dynamics. Using wavelet coherence and cross-power spectrum analysis on a 36-year dataset, our study uncovers a robust and enduring long-term relationship marked by substantial volatility spillover between these markets. This effect is notably pronounced during major economic and geopolitical events, with the COVID-19 pandemic demonstrating a prolonged spillover. These findings highlight the interconnectedness of crude oil and gold markets, especially during global economic and political uncertainty. Investors, producers, and consumers can leverage this insight for informed asset allocation, optimized investment strategies, and effective risk management, including developing robust hedging strategies and managing exposure to price fluctuations.

Keywords: Crude oil; Gold; Volatility spillover; Wavelet (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10819-7

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