When does gold protect emerging markets? structural vs. cyclical uncertainty in a time–frequency analysis

This paper explores how gold protects emerging market (EM) equities by separating long-term structural uncertainty from short-term market stress. We use a multiscale time–frequency framework combining wavelet coherence, partial and multiple coherence, and cross-wavelet analysis. The sample covers daily data for twelve major EMs between 2016 and 2025, conditioned on the Geopolitical Risk (GPR) index and the Volatility Index (VIX). Results reveal two distinct regimes. Under geopolitical risk, gold and equities move together at low frequencies, showing that gold behaves as a strategic hedge over long horizons. During volatility spikes, however, the link becomes short-lived and intense, eroding diversification when stress is highest. The strength of these effects varies across countries, depending on financial depth, external exposure, and currency risk. A complementary multifractal cross-correlation analysis confirms that gold’s hedging power is dynamic and scale-dependent. These findings provide time–frequency evidence on the conditions under which gold’s portfolio role appears stronger or weaker across emerging markets. They also offer guidance for investors seeking horizon-aware diversification and for policymakers monitoring risk transmission to emerging markets.