The Role of Gold as a Hedge or Safe Haven in African Stock Markets during the COVID-19 Pandemic

Abstract

This study seeks to investigate the role of gold as a hedge or safe haven against African stock movements during the COVID-19 pandemic by using a two-state Markov Regime-Switching approach. The findings suggest that gold serves as a weak hedge in Malawi, Morocco, Nigeria, Tunisia, and Zambia, a weak safe haven in Ghana, Kenya, Mauritius, Rwanda, Uganda, and Zimbabwe, and a strong safe haven in Botswana and Tanzania. Furthermore, the findings reveal that gold co-moves with the South African stock market regardless of the market regime. These findings imply that, on average, gold offers limited protection for African equity investors.