Hedging and safe-haven characteristics of Gold against currencies: An investigation based on multivariate dynamic copula theory. (October 2020)

• Record Type: Journal Article
• Authors: Nguyen, Quynh Nga; Bedoui, Rihab; Majdoub, Najemeddine; Guesmi, Khaled; Chevallier, Julien
• Is Part Of: Resources policy. Volume 68(2020)
• Publication Date: 2020-10
• Subjects: Copula -- Gold -- Effective exchange rates -- Safe-haven -- Hedging; C32 -- G12 -- F36; Mines and mineral resources -- Periodicals; Ressources minérales -- Périodiques; Ressources naturelles -- Gestion -- Périodiques; Environnement -- Politique gouvernementale -- Périodiques; 333.8
• DOI: 10.1016/j.resourpol.2020.101766
• Languages: English
• ISSNs: 0301-4207

Abstract

Abstract: The copula concept presents a powerful and flexible tool for studying and modeling multivariate distribution. The most popular copulas are the Archimedean and elliptical copula used to analyze the dependence distribution. In this article, we assess the capacity of Gold to be a hedge or a safe-haven against the depreciation value of USD, EUR, and JPY on average and during extreme movement using the copula theory. We then examine the dependence structure between Gold and exchange rates during the sub-prime crisis and the dramatic increase in the USD value. Empirical results suggest that Gold is an effective and robust hedge against the depreciation value of the currencies. A noteworthy finding, we find that Gold is a stabilizing asset with substantial safe-haven property in turmoil and high uncertainty periods. Highlights: Relationship between Gold and FX using copula theory. Gold is a robust hedge against currencies' depreciation. Gold exhibits substantial safe-haven properties during turmoil periods. Application not only to USD, but also EUR, GBP and JPY.