Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data

Heni Boubaker (1) , Juncal Cunado , Luis A. Gil-Alana , Rangan Gupta

1 IPAG - Institut de Planétologie et d'Astrophysique de Grenoble

Using annual data spanning the period of 1258-2018, we test the safe haven characteristic of gold in the wake of global crises. We find that, when we allow for regime-switching to capture nonlinearity and structural breaks, gold serves as a strong hedge against crises, especially during the bullish regime of the market, and in particular from the post-World War I period, as suggested by a time-varying model. In comparison, silver, however, does not seem to possess the safe haven property over the historical period of 1688-2018. Finally, we also find that global crises can accurately predict real gold returns over a long-span (1302-2018) out-of-sample period.

Keywords: C22; Q02

Domains: Sciences of the Universe [physics]

Heni Boubaker, Juncal Cunado, Luis A. Gil-Alana, Rangan Gupta. Global crises and gold as a safe haven: Evidence from over seven and a half centuries of data. Physica A: Statistical Mechanics and its Applications, 2020, 540, ⟨10.1016/j.physa.2019.123093⟩. ⟨insu-03705220⟩