Which Precious Metal Shines Brightest for International Investors?: A Vine Copula Approach

Abstract

This paper investigates the role of precious metals (Gold, Silver and Platinum) as hedge and/or safe haven assets against the G-7 stock markets that represents the most developed economies, by characterizing the multivariate dependence structure using vine copulas, mainly the C-vine and the D-vine, to capture more flexibly the dependencies between the three precious metals and each stock market index. Therefore, by the information about the dependence on average and the dependence in extreme market conditions provided by the vine copula, we find that all precious metals under study serve as hedge and safe haven assets in almost all countries with different degrees. On one hand, our hedge analysis results indicate that only gold may serve as a strong hedge on average while silver and platinum may be good diversifier assets. On the other hand, our safe haven analysis results show that both of gold and silver may be strong safe haven assets in almost all the G-7 countries.