How resistant is gold to stress? New evidence from global supply chain

Abstract

The investigation performs the wavelet method to explore the time-dependant correlation between gold price (GP) and global supply chain pressure (GSCP). The conclusion shows that GSCP positively leads GP in the long, medium and short runs, meaning that the strains of the global supply chain can motivate the gold market, and gold has the ability to resist these stresses. Conversely, GP positively leads GSCP in the medium and short terms, suggesting that the gold market can be considered as a forward-looking index to reflect GSCP. Then, we could discover that gold may play a dual role in hedging and predicting global supply chain risks in the medium and short terms while only showing hedging ability in the long term. By comparing the gold prices in different denominations, we can not only evidence the robustness of this investigation but also conclude that dollar-and Renminbi-denominated gold is better than euro-and pound-denominated gold in hedging ability but worse in perspective capacity, while Yen-denominated gold exhibits the weakest interrelation with GSCP. In the context of the Russian-Ukrainian war and serious global supply chain crisis, these outcomes can give meaningful lesson to the public, enterprise and relevant countries.