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Climate Risks and Real Gold Returns over 750 Years

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Anandamayee Majumdar

    (Department of Mathematics, San Francisco State University, California, USA)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany.)

  • Onur Polat

    (Department of Public Finance, Bilecik Seyh Edebali University, Bilecik, Turkiye)

Abstract

Using data that cover the annual period from 1258 to 2023, we studied the link between real gold returns and climate risks. We document a positive contemporaneous link and a negative predictive link. Our findings further show that the predictive link gave rise historically to significant out-of-sample forecasting gains. The positive contemporaneous link is consistent with the view that investors viewed gold as a safe haven in times of elevated climate risks. The negative predictive link, in turn, is consistent with an overshooting scenario in which the real gold price overshoots in response to climate risks only to return subsequently to a lower value. Our findings carry important implications for investors and policymakers, given that our analyses covers the longest possible data sample involving the gold market, and hence, is independent of any sample-selection bias.

Suggested Citation

  • Rangan Gupta & Anandamayee Majumdar & Christian Pierdzioch & Onur Polat, 2024. "Climate Risks and Real Gold Returns over 750 Years," Working Papers 202436, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202436
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    More about this item

    Keywords

    Gold prices; Climate risks; Predictions;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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