The Behaviour of Gold Prices During Periods of Economic Uncertainty (Advances in Economics Management and Political Sciences)

Summary

• The paper studies gold alongside economic policy uncertainty, market risk sentiment and key financial variables using monthly data from January 2006 to December 2025.p.1
• It concludes that gold's safe-haven function was phased and conditional in both the 2008 financial crisis and the 2020 COVID-19 pandemic.p.1
• The study uses 240 monthly observations from January 2006 to December 2025.p.3
• From July 2007 to March 2008, gold rose from about $665 per ounce to about $968 per ounce, an increase of about 45.6%.p.4
• Between September and November 2008, gold fell by about 8.3%, from about $830 per ounce to about $761 per ounce, as liquidity pressures increased.p.4
• In the same period the VIX increased to around 59.89 in October 2008 and the US Dollar Index rose from around 88.95 in August 2008 to around 100.77 in November.p.4

Key insights

1. Gold prices do not always move together with risk indicators such as uncertainty and market volatility.p.1
2. Gold may come under early pressure when the US dollar strengthens and liquidity tightens, then rise again as real interest rates fall.p.1
3. Gold prices rose ahead of the 2008 crisis peak, gaining about 45.6% between July 2007 and March 2008.p.4
4. As the 2008 crisis reached its height, gold fell by about 8.3% between September and November 2008.p.4
5. Rising economic uncertainty and market panic give context for gold prices but do not fully explain them; the US dollar, real interest rates, stock markets and crisis stage must also be considered.p.4
6. In both crises the VIX rose, stocks fell and the US dollar gained value at first, while gold did not rise immediately and sustainably.p.5
7. Real interest rates declined gradually after the 2008 crisis but fell rapidly to negative levels after the COVID-19 shock.p.5
8. Because gold is also affected by investors' allocation behaviour and market liquidity, a lag between rising risk indicators and rising gold prices does not mean gold lost its safe-haven function.p.6