Abstract
Amidst the uncertainty in markets spurred by globalization and technological advancements, the volatility of the crude oil and gold markets, which are emblematic of natural resource markets (NRMs), profoundly impacts global economic sustainability. This study innovatively quantifies and contrasts the impact of macroeconomic uncertainty factors on the volatility and dynamic correlation of these pivotal NRMs by extending the GJR-GARCH-MIDAS-X and DCC-MIDAS-RC-X models grounded in global economic policy uncertainty (GEPU), trade policy uncertainty (TPU), monetary policy uncertainty (MPU), and geopolitical risk (GPR). Concurrently, employing principal component analysis (PCA) blends numerous uncertainty factors, heightening the models’ explanatory capacity and predictive precision. Empirical findings suggest that all uncertainty factors exert significant positive effects on both crude oil and gold volatility, albeit with heterogeneity. Furthermore, the correlation between crude oil and gold fluctuates over time under the influence of uncertainty factors. Additionally, this study revealed asymmetric effects on realized volatility between the two NRMs. This research not only provides novel theoretical insights and empirical evidence concerning the intricate dynamic interplay between the two NRMs, but also has significant ramifications for policymakers, market regulators, and investors in crafting effective strategies and decisions amidst market uncertainty.
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