IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v46y2015ip2p85-91.html
   My bibliography  Save this article

Understanding the nexus between oil and gold

Author

Listed:
  • Tiwari, Aviral Kumar
  • Sahadudheen, I.

Abstract

This paper tries to explore the relationship between real oil price and real gold price over a period of 1990 April to 2013 August. In order to check for the impact of real oil price on the real gold, return on real oil and return on real gold are used. The study employed types of GARCH models which suggested that an increase in real oil price has positive effects on gold. The EGARCH model provides the evidence that a 10% increase in the oil price returns leads to 4.7% increase of gold and shocks to gold price have an asymmetric effect, which means positive and negative shocks have different effect on gold price in terms of magnitude.

Suggested Citation

  • Tiwari, Aviral Kumar & Sahadudheen, I., 2015. "Understanding the nexus between oil and gold," Resources Policy, Elsevier, vol. 46(P2), pages 85-91.
    • Handle: RePEc:eee:jrpoli:v:46:y:2015:i:p2:p:85-91
    DOI: 10.1016/j.resourpol.2015.09.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420715000859
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2015.09.003?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.

    References listed on IDEAS

    as
    1. Narayan, Paresh Kumar & Narayan, Seema & Zheng, Xinwei, 2010. "Gold and oil futures markets: Are markets efficient?," Applied Energy, Elsevier, vol. 87(10), pages 3299-3303, October.
    2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    3. Michael Melvin & Jahangir Sultan, 1990. "South African political unrest, oil prices, and the time varying risk premium in the gold futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 10(2), pages 103-111, April.
    4. Thai-Ha Le & Youngho Chang, 2011. "Oil and gold: correlation or causation?," Economics Bulletin, AccessEcon, vol. 31(3), pages 1-31.
    5. Soytas, Ugur & Sari, Ramazan & Hammoudeh, Shawkat & Hacihasanoglu, Erk, 2009. "World oil prices, precious metal prices and macroeconomy in Turkey," Energy Policy, Elsevier, vol. 37(12), pages 5557-5566, December.
    6. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
    7. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    8. Yen-Hsien Lee & Ya-Ling Huang & Hao-Jang Yang, 2012. "The Asymmetric Long-Run Relationship Between Crude Oil And Gold Futures," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 6(1), pages 9-15.
    9. Thai-Ha LE & Youngho CHANG, 2011. "Oil and Gold Prices: Correlation or Causation?," Economic Growth Centre Working Paper Series 1102, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    10. Hammoudeh, Shawkat & Yuan, Yuan, 2008. "Metal volatility in presence of oil and interest rate shocks," Energy Economics, Elsevier, vol. 30(2), pages 606-620, March.
    11. Ghosh, Sajal, 2011. "Examining crude oil price - Exchange rate nexus for India during the period of extreme oil price volatility," Applied Energy, Elsevier, vol. 88(5), pages 1886-1889, May.
    12. Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, vol. 55(2), pages 391-407, March.
    13. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "The crude oil market and the gold market: Evidence for cointegration, causality and price discovery," Resources Policy, Elsevier, vol. 35(3), pages 168-177, September.
    14. Myeong Hwan Kim & David A. Dilts, 2011. "The Relationship of the value of the Dollar, and the Prices of Gold and Oil: A Tale of Asset Risk," Economics Bulletin, AccessEcon, vol. 31(2), pages 1151-1162.
    15. Sari, Ramazan & Hammoudeh, Shawkat & Soytas, Ugur, 2010. "Dynamics of oil price, precious metal prices, and exchange rate," Energy Economics, Elsevier, vol. 32(2), pages 351-362, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shahbaz, Muhammad & Balcilar, Mehmet & Abidin Ozdemir, Zeynel, 2017. "Does oil predict gold? A nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 52(C), pages 257-265.
    2. Kanjilal, Kakali & Ghosh, Sajal, 2017. "Dynamics of crude oil and gold price post 2008 global financial crisis – New evidence from threshold vector error-correction model," Resources Policy, Elsevier, vol. 52(C), pages 358-365.
    3. İrfan Civcir & Uğur Akkoç, 2021. "Dynamic volatility linkages and hedging between commodities and sectoral stock returns in Turkey: Evidence from SVAR‐cDCC‐GARCH model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1978-1992, April.
    4. Das, Debojyoti & Bhatia, Vaneet & Kumar, Surya Bhushan & Basu, Sankarshan, 2022. "Do precious metals hedge crude oil volatility jumps?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    5. Liu, Min & Lee, Chien-Chiang, 2022. "Is gold a long-run hedge, diversifier, or safe haven for oil? Empirical evidence based on DCC-MIDAS," Resources Policy, Elsevier, vol. 76(C).
    6. Wang, Xinya & Lucey, Brian & Huang, Shupei, 2022. "Can gold hedge against oil price movements: Evidence from GARCH-EVT wavelet modeling," Journal of Commodity Markets, Elsevier, vol. 27(C).
    7. Reboredo, Juan C., 2013. "Is gold a hedge or safe haven against oil price movements?," Resources Policy, Elsevier, vol. 38(2), pages 130-137.
    8. Akkoc, Ugur & Civcir, Irfan, 2019. "Dynamic linkages between strategic commodities and stock market in Turkey: Evidence from SVAR-DCC-GARCH model," Resources Policy, Elsevier, vol. 62(C), pages 231-239.
    9. Mehmet Balcilar & Zeynel Abidin Ozdemir & Muhammad Shahbaz, 2019. "On the time‐varying links between oil and gold: New insights from the rolling and recursive rolling approaches," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 1047-1065, July.
    10. Luqman, Muhammad & Mugheri, Adil & Ahmad, Najid & Soytas, Ugur, 2023. "Casting shadows on natural resource commodity markets: Unraveling the quantile dilemma of gold and crude oil prices," Resources Policy, Elsevier, vol. 86(PA).
    11. K.S., Sujit & Ray, Subhajyoti, 2023. "Linear and nonlinear asymmetric relationship in crude oil, gold, stock market and exchange rates: An evidence from the UAE," Resources Policy, Elsevier, vol. 83(C).
    12. Gülfen TUNA, 2017. "Time Varying Causality Between Gold And Oil Prices," Romanian Economic Business Review, Romanian-American University, vol. 12(1), pages 59-67, March.
    13. Behmiri, Niaz Bashiri & Manera, Matteo, 2015. "The role of outliers and oil price shocks on volatility of metal prices," Resources Policy, Elsevier, vol. 46(P2), pages 139-150.
    14. Thai-Ha Le & Youngho Chang, 2011. "Oil and gold: correlation or causation?," Economics Bulletin, AccessEcon, vol. 31(3), pages 1-31.
    15. Yıldırım, Durmuş Çağrı & Cevik, Emrah Ismail & Esen, Ömer, 2020. "Time-varying volatility spillovers between oil prices and precious metal prices," Resources Policy, Elsevier, vol. 68(C).
    16. Johnson A. Oliyide & Oluwasegun B. Adekoya & Muhammad A. Khan, 2021. "Economic policy uncertainty and the volatility connectedness between oil shocks and metal market: An extension," International Economics, CEPII research center, issue 167, pages 136-150.
    17. Singhal, Shelly & Choudhary, Sangita & Biswal, Pratap Chandra, 2019. "Return and volatility linkages among International crude oil price, gold price, exchange rate and stock markets: Evidence from Mexico," Resources Policy, Elsevier, vol. 60(C), pages 255-261.
    18. Ahmed Ghorbel & Wajdi Hamma & Anis Jarboui, 2017. "Dependence between oil and commodities markets using time-varying Archimedean copulas and effectiveness of hedging strategies," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(9), pages 1509-1542, July.
    19. Raggad, Bechir & Bouri, Elie, 2023. "Gold and crude oil: A time-varying causality across various market conditions," Resources Policy, Elsevier, vol. 86(PA).
    20. Mokni, Khaled & Hammoudeh, Shawkat & Ajmi, Ahdi Noomen & Youssef, Manel, 2020. "Does economic policy uncertainty drive the dynamic connectedness between oil price shocks and gold price?," Resources Policy, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Gold; Oil; Asymmetry; GARCH; Unit root;
    All these keywords.

    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:jrpoli:v:46:y:2015:i:p2:p:85-91. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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/inca/30467 .

    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.