Do oil, gold and metallic price volatilities prove gold as a safe haven during COVID-19 pandemic? Novel evidence from COVID-19 data

The spreading COVID-19 outbreak has wreaked havoc on the world's financial system that raises an urgent need for the re-evaluation of the gold as safe haven for their money because of the unprecedented challenges faced by markets during this period. Therefore, the current study investigates whether different asset class volatility indices affect desirability of gold as a safe-haven commodity during COVID-19 pandemic. Long run and the short run relationship of gold prices with gold price volatility, oil price volatility, silver price volatility and COVID-19 (measured by the number of deaths due to COVID) has been analyzed in the current study by applying ARDL Bound testing cointegration and non linear ARDL approach on daily time series data ranging from January 2020 to Dec 2021. Findings of the study suggest that in the long run, oil price volatility and gold price volatility positively affect the gold prices, whereas the effect of silver price volatility on gold prices is negative in the long run. However in the short run, all the three indices negatively impact the gold prices. In contrast, the impact of COVID-19 is positive both in the short run and in the long run that proves the validity of gold as safe haven asset in the time of the deadly pandemic. The findings of this study have significant implications and offer investors with some indications to hedge their investments by considering the gold's ability of safe haven during this era of pandemic.

Automated summary

The study investigates the impact of different asset class volatility indices on the desirability of gold as a safe-haven commodity during the COVID-19 pandemic. Using daily time series data from January 2020 to December 2021, the study analyzes the long-run and short-run relationship between gold prices and gold price volatility, oil price volatility, silver price volatility, and COVID-19. The findings suggest that oil price volatility and gold price volatility positively affect gold prices in the long run, while silver price volatility has a negative effect. In the short run, all three indices negatively impact gold prices, but COVID-19 has a positive impact, proving the validity of gold as a safe haven asset during the pandemic.