Comparative analysis of shock transmission and connectivity between base and precious metal markets: a study using R2-decomposed connectedness approach

This study examines the return spillover dynamics and connectivity of base and precious metal markets from June 16, 2014, to October 8, 2024, utilizing the recently established 𝑅²-decomposed connectedness methodology. This approach clarifies directional interactions by differentiating between contemporaneous and lagged transmission channels, which are commonly obscured in traditional VAR-based models. Our data indicate that contemporaneous spillovers predominate in the transmission process, constituting about 95% of total connectivity. Silver and copper regularly serve as primary transmitters of shocks, whereas nickel and aluminum mostly act as passive receivers, especially via delayed channels. Gold demonstrates a dual dynamic role, shifting from a short-term receiver to a long-term transmitter in the post-COVID context. The analysis highlights substantial economic disruptions—specifically the COVID-19 pandemic and the Russia–Ukraine conflict—as critical turning points that intensified systemic risk and modified inter-market dynamics. Sensitivity tests employing Spearman and Kendall rank correlation coefficients were performed to verify the robustness and stability of our results. Additionally, we conducted robustness checks accounting for time-zone differences between COMEX and LME markets, which revealed stable Total connectedness but significant shifts in the directional roles of individual metals. These conclusions possess practical significance for investors, policymakers, and risk managers, underscoring the necessity for timely tactics and a reassessment of metals hitherto seen as protective assets.