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How did gold prices respond to the COVID-19 pandemic?

Author

Listed:
  • Sudharshan Reddy Paramati
  • Hussein Abedi Shamsabadi
  • Harshavardhan Reddy Kummitha

Abstract

This paper investigates the asymmetric impact of COVID-19 on gold prices by making use of high frequency data and a recently developed nonlinear estimation approach. The analysis considers three main dimensions of COVID-19: daily new cases, recoveries and deaths. The findings reveal that decreases in COVID-19 new cases and increases in recoveries cause an upswing in gold prices. These evidences imply that the reduction in new COVID-19 cases or more recoveries from COVID-19 improves both investors’ and consumers’ psychological confidence. In other words, the investors and consumers become more optimistic about their future and tend to demand more gold. On the other hand, the increases (decreases) in policy uncertainty, oil prices, and world stock index performance elevate (reduce) gold prices. The study also establishes a positive nexus between equity market uncertainty and gold prices.

Suggested Citation

  • Sudharshan Reddy Paramati & Hussein Abedi Shamsabadi & Harshavardhan Reddy Kummitha, 2023. "How did gold prices respond to the COVID-19 pandemic?," Applied Economics Letters, Taylor & Francis Journals, vol. 30(20), pages 2987-2993, November.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:20:p:2987-2993
    DOI: 10.1080/13504851.2022.2117773
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