Economic Virus in Our Body Cells: To What Extent Are Gold Prices Immune Against Sectoral Stock Indexes?

Abstract

The novel coronavirus (COVID-19) has revealed profound and disproportionate effects not only on global financial markets but also on commodity markets. Considering the potential safe-haven role of gold as a vital commodity against economic turmoils and uncertainties; in this study, it has been aimed to investigate the long run impacts and short-run dynamics of the COVID-19 related variables (daily new confirmed cases in the world and U.S., COVID-19 Containment & Health Index) and different macro-financial factors on daily COMEX gold futures contracts prices, especially presenting a comparative analysis with respect to various sectoral stock indexes associated with S&P 500 and Dow Jones -including Health Care, Technology, Medical Equipment, Financials, Industrials, Information Technology and Energy sectors- for the sample period 10.03.2020-22.03.2021 by utilizing from Autoregressive Distributed Lag (ARDL) approach. Analysis results are of great importance in forming crucial policy implications about by which factors and sectoral stocks gold prices are being influenced the most. Consequently; Dow-Jones Financials, S&P 500 Industrials and S&P 500 Energy stock indexes can be said to have a significant impact on gold prices in the long run at 10% significance level. In the models containing these indexes, CBOE volatility index affects gold prices inversely while WTI oil prices have no impact on gold prices. In the long term, the weakest findings in terms of coefficient significancies have been obtained for the model which includes S&P 500 Energy stock index returns. Furthermore, daily new cases in the world -contrary to the cases in U.S.- generally affect gold prices.