Is Gold’s Safe Haven Appeal in Market Crises Fading?
The hedge effectiveness of gold has witnessed notable decline during the volatile period.
SEATTLE (Scrap Monster): A recent research conducted by the University of Stirling suggests that gold’s safe haven effect during periods of high market volatility has faded. The study findings are based on analysis of gold market behaviour over a period of 37 years ending May last year.
According to researchers from the University of Stirling and the Abdullah Alsalem University of Kuwait, the global gold market experienced two distinct periods. During the first period from 1980 to 2005, the market remained more or less stable. However, the second period between 2006 and 2024 was volatile.
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The hedge effectiveness of gold has witnessed notable decline during the volatile period. Interestingly, the yellow metal’s correlation with stocks during crisis situations has turned positive after 2005.
David McMillan, professor of finance and head of accounting and finance at Stirling Business School pointed out that the current prices of gold and stocks are high. The general safe haven argument is that stocks and gold move in opposite directions, but they are moving together, he said.
The analysis concluded that gold has started to lose its position as a safe haven during volatile periods. Further, it noted that only platinum has exhibited a safe haven trend during both stable and volatile periods.