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Sino-American relations and gold market volatility

Author

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  • Wu, Bangzheng

Abstract

This study investigates the impact of Sino-American tensions, as captured by the U.S.‒China Tension (UCT) index, on international gold price volatility. Bivariate GARCH-MIDAS-UCT models were employed in this study, and the findings reveal that UCT significantly amplifies gold price volatility, surpassing the effects of traditional indicators such as economic policy uncertainty and geopolitical risk. Moreover, global uncertainty indices exert a stronger influence on gold volatility than do domestic factors. The model's out-of-sample predictive performance further validates the robustness of the use of the UCT in forecasting gold price volatility. These findings highlight the critical role of Sino-American tensions in predicting gold market volatility, providing valuable insights for investors in managing risk amidst geopolitical instability.

Suggested Citation

  • Wu, Bangzheng, 2025. "Sino-American relations and gold market volatility," Finance Research Letters, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006397
    DOI: 10.1016/j.frl.2025.107379
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    Keywords

    Volatility forecasting; U.S.‒China tensions; Gold market;
    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
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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