Gold price volatility and forecasting evaluations with the impact of COVID-19 pandemic

Abstract

Gold is a precious metal that has always been recognized as a safe-haven investment for many defensive investors. As compared to the stock market, gold is considered less volatile. In early 2020, the Covid-19 pandemic has caused turbulence in the financial market. It is believed that the pandemic has affected the volatility of gold market. This study aims to investigate the volatility of gold market before the Covid-19 pandemic and during the pandemic using several different models including GARCH, EGARCH and GJR-GARCH. The use of EGARCH and GJR-GARCH is meant to capture the leverage effect of the market in order to have a better volatility forecast. With the results from the analysis, other financial applications such as determining value-at-risk and forecasting can be done. The results of this study act as a good reference to investors who are interested in gold investment.