Uncertainty a Friend or a Foe for Gold Returns: A Study on Malaysian Gold Instruments
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Abstract
This study explores the safe-haven properties of gold instruments offered in the Malaysian market against six different uncertainty measures namely the Chicago Board Options Exchange Volatility Index (VIX), Equity Market Volatility (EMV), Geopolitical Risk (GPR), Global Economic Policy Uncertainty (GEPU), Monetary Policy Uncertainty (MPU) and World Uncertainty Index (WUI). The three different types of gold instruments offered in the Malaysian market namely the Gold Exchange-Traded Fund (ETF), Gold Futures (FGLD) and Gold Bullion Coin (KIJANG EMAS) were examined in this study. The Autoregressive Distributed Lag (ARDL) model was employed to analyse the long run relationship between the variables. The Bounds test results indicated that the gold returns and uncertainty indexes are correlated in the long run, whilst the ARDL results indicated that five out of six uncertainty measures have significant impact on the returns of these gold instruments. One of the key findings of this study reveals a statistically significant positive relationship between EMV and the returns of specific gold instruments. Specifically, a 1% increase in the EMV index contributes to an increase of 3.56% in the returns of FGLD and 2.81% in the returns of KIJANG EMAS. This study expands the knowledge on the impact of uncertainty on Malaysian gold returns and identifies gold’s safe-haven properties against uncertainty measures.
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