Gold and Geopolitical Risk

25 Pages Posted: 13 Feb 2018

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Lee A. Smales

University of Western Australia

Date Written: January 24, 2018


There is a growing empirical literature on gold’s safe haven status with respect to financial risks but no study with respect to global geopolitical risks. This paper extends the common focus on extreme stock market movements and financial turmoil with an analysis of geopolitical risk. We find that gold shows a unique behavior among all precious metals with a positive reaction to geopolitical risks and threats but no reaction to realized geopolitical acts. There is no additional increase in gold return volatility due to geopolitical risks and geopolitical risk is not captured by the stock market volatility index VIX. The findings provide new evidence on the unique status of gold as a global safe haven asset.

Keywords: Gold; safe haven; geopolitical risks; VIX; precious metals; Bitcoin

JEL Classification: G10; G11; G14: G15; G18; F5

Suggested Citation

Baur, Dirk G. and Smales, Lee A., Gold and Geopolitical Risk (January 24, 2018). Available at SSRN: or

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


Lee A. Smales

University of Western Australia ( email )

UWA Business School
35 Stirling Highway
Perth, Western Australia 6009

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