IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v248y2025ics0165176525000552.html
   My bibliography  Save this article

Knight in shining armor: Ambiguity and gold prices

Author

Listed:
  • Karahan, Cenk C.

Abstract

Knightian uncertainty, or ambiguity, posits that investors prefer known risks over unknown risks, a behavior referred to as ambiguity aversion. This study examines the influence of ambiguity on gold’s behavior as a safe-haven asset, focusing on its impact on the net convenience yield — a key measure of the intrinsic value of holding physical gold. Using a market-based measure of ambiguity rooted in the volatility of probabilities, the analysis finds a consistent and significant positive effect on gold’s convenience yield. The findings remain robust across alternative uncertainty measures, model specifications, and extended time periods, including an ambiguity measure derived from the US Dollar index and daily range spot gold data. This study underscores the superiority of the market-based ambiguity measure over traditional uncertainty proxies and highlights the role of ambiguity aversion in reinforcing gold’s safe-haven status during periods of heightened uncertainty.

Suggested Citation

  • Karahan, Cenk C., 2025. "Knight in shining armor: Ambiguity and gold prices," Economics Letters, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000552
    DOI: 10.1016/j.econlet.2025.112218
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525000552
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112218?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Gold; Safe-haven assets; Ambiguity; Knightian uncertainty; Ambiguity aversion; Convenience yield;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000552. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.