The essential role of Russian geopolitics: A fresh perception into the gold market

Abstract

This paper explores the interrelation between the geopolitical situation in Russia and the international gold market and further investigates whether Russian geopolitics can stimulate the gold market. We perform the bootstrap sub-sample method to obtain the Granger causal relation between Russian geopolitical risk (RGR) and gold price (GP). The empirical conclusions evidence positive and adverse impacts from RGR to GP exist. The positive influences indicate that Russia's deteriorating geopolitical environment may boost the international gold market. However, the adverse effects from RGR to GP cannot support this view, mainly due to the economic and non-Russian geopolitical factors. The negative influence conflicts with the intertemporal capital asset pricing model (ICAPM), which assumes that GP can be positively affected by RGR. Conversely, there is positive effect of GP on RGR, revealing that gold market could be viewed as a forward-looking indicator to mirror RGR. In the intensified war between Russia and Ukraine, these conclusions benefit the public and related countries by reducing losses by optimising investment and adjusting gold reserves, as well as guaranteeing resident health, national security and peaceful development through a more comprehensive analysis of RGR.