Reassessing the Role of Precious Metals as Safe Havens - What Colour is Your Haven and Why?

88 Pages Posted: 27 Jan 2017 Last revised: 9 Feb 2017

See all articles by Sile Li

Sile Li

Trinity Business School, Trinity College Dublin

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; Ho Chi Minh City University of Economics and Finance

Date Written: February 8, 2017

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.

Keywords: precious metals, gold, silver, platinum, palladium, market stress, zero-inflated Poisson, extreme bound analysis

Suggested Citation

Li, Sile and Lucey, Brian M., Reassessing the Role of Precious Metals as Safe Havens - What Colour is Your Haven and Why? (February 8, 2017). Available at SSRN: https://ssrn.com/abstract=2906707 or http://dx.doi.org/10.2139/ssrn.2906707

Sile Li

Trinity Business School, Trinity College Dublin ( email )

2-3 College Green
Dublin, D2
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

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Sydney, NSW 2006
Australia

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

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