Gold as a Hedge Against Volatile Oil Prices: Insights from the COVID-19 Pandemic

Abstract

This study examines the COVID-19 pandemic and gold's safe-haven qualities in the context of volatile oil prices. In light of the unique market conditions brought on by the epidemic, the study investigates how gold acts as a hedge against fluctuations in oil prices. The price of gold and oil is examined using a VAR (Vector Autoregressive) model from 2010 to 2023. The COVID-19 epidemic and the erratic oil prices are reflected in the VAR model as dynamic interactions and interdependencies between these two vital commodities. According to this analysis, gold has a significant inverse relationship with oil prices, which allows it to act as a buffer against changes in the price of oil as well as the COVID-19 pandemic. During periods of high oil price volatility, gold offers investors security and asset preservation. The study contributes to the understanding of the significance of gold as a haven asset and diversification tool in the context of oil price volatility and the COVID-19 pandemic. Gold should be taken into account by investors, decision-makers, and market participants as a hedge against volatile oil prices and unstable economic conditions.