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Reassessing the role of precious metals as safe havens–What colour is your haven and why?

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  • Li, Sile
  • Lucey, Brian M.

Abstract

The role of gold as a safe haven asset has been extensively studied in recent years. This article extends previous literature and examines time varying safe haven properties versus equities and bonds of four precious metals (gold, silver, platinum and palladium) across eleven countries. Results suggest that the metals each play safe haven roles; there are times when one metal is not while another may be a safe haven against an asset. The second part of this article attempts to identify robust economic and political determinants of precious metals safe haven properties applying zero-inflated Poisson regression (ZIP) and extreme bound analysis (EBA). Economic Policy Uncertainty is found to be a positive and robust determinant of a precious metal being a safe haven. This holds across countries. Stock volatility, exchange rates, interest rate and credit spreads are also found to be significant, but results are quite mixed for different markets and are fragile of model specification.

Suggested Citation

  • Li, Sile & Lucey, Brian M., 2017. "Reassessing the role of precious metals as safe havens–What colour is your haven and why?," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 1-14.
    • Handle: RePEc:eee:jocoma:v:7:y:2017:i:c:p:1-14
    DOI: 10.1016/j.jcomm.2017.05.003
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    References listed on IDEAS

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    1. Shaen Corbet & Cian Twomey, 2014. "An index of financial market stress for the United Kingdom," Economics and Business Letters, Oviedo University Press, vol. 3(2), pages 127-133.
    2. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2008. "Cross-country determinants of life satisfaction: exploring different determinants across groups in society," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(1), pages 119-173, January.
    3. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    4. David F. Hendry & Hans-Martin Krolzig, 2004. "We Ran One Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 799-810, December.
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    More about this item

    Keywords

    Safe Haven; Precious metals; Gold; Silver; Platinum; Palladium; Market stress; Zero-inflated Poisson; Extreme bound analysis.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other

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