Do volatility indices diminish gold's appeal as a safe haven to investors before and during the COVID-19 pandemic?

This study addresses the research question of whether volatility indices of different asset classes reduce gold's appeal as a safe-haven asset before and during the COVID-19 pandemic. We use daily data for seven volatility indices and gold prices and apply the suitable nonlinear autoregressive distributed lag method to analyze the data. Our results indicate that during COVID-19, only the negative Eurocurrency volatility has diminished gold prices in the long term, whereas in the short term, the positive gold, silver, emerging market, and (lagged) financial market volatilities have diminished gold prices. During the pre-COVID-19 normal period, volatilities in the financial, energy, gold, silver, and eurocurrency markets improved gold prices, whereas in the short term, only lagged negative oil volatility diminished gold prices. A robustness test for the 2011–2015 pre-COVID-19 period reveals that this period is to an extent comparable to that of COVID-19. This study reveals no direct effects from emerging markets volatility on gold prices. Notwithstanding, a long memory in gold prices persists and uneven spillover effects exist. Finally, those volatilities predominantly increase gold prices under the normal economic conditions but decrease gold's appeal as a safe haven during crises in the comparable periods. We delineate the implications for investors.