Is gold a hedge or a safe-haven asset in the COVID–19 crisis?

Md Akhtaruzzaman, Sabri Boubaker (), Brian Lucey and Ahmet Sensoy
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Md Akhtaruzzaman: ACU - Australian Catholic University
Sabri Boubaker: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, VNU - Vietnam National University [Hanoï]
Brian Lucey: Trinity College Dublin, University of Ljubljana
Ahmet Sensoy: Bilkent University [Ankara]

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Abstract: This study examines the role of gold as a hedge or safe-haven asset in different phases of the COVID-19 pandemic crisis, corresponding to the timing of fiscal and monetary stimuli to support the weakened economy. Using high-frequency data, the results show that gold served as a safe-haven asset for stock markets during Phase I (December 31, 2019–March 16, 2020) of the pandemic. However, gold lost its safe-haven role during Phase II (March 17−April 24, 2020). The optimal weights of gold in S&P 500, Euro Stoxx 50, Nikkei 225, and WTI crude oil portfolios significantly increased during Phase II, suggesting that investors expanded investment in gold as a ‘flight-to-safety asset' during the crisis. Further, hedging costs increased significantly during Phase II. These findings provide insight for individual and institutional investors and guidance to policymakers, regulators, and media on how gold evolved as a hedge and safe-haven asset in different phases of the pandemic.

Keywords: COVID-19; Gold; Safe-haven asset; Hedge; Financial crisis (search for similar items in EconPapers)
Date: 2021-07-13
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Published in Economic Modelling, 2021, 102, pp.105588. ⟨10.1016/j.econmod.2021.105588⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04998990

DOI: 10.1016/j.econmod.2021.105588

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