Will Gold Prices Persist Post Pandemic Period? An Econometric Evidence

Abstract

Recurrent stock market fall and rise sequel by COVID-19, rising global inflation, increase in Fed interest rates, the unprecedented meltdown of technology stocks, fear of trade wars, tightening of governments’ fiscal policies call for a new trend in international investing. It is time for the investors to rethink, rebalance and reset their investment strategies to position and protect their portfolios during and post-pandemic period. This paper attempts to forecast the gold prices for the post-pandemic era and explores whether gold will serve as a decisive hedge during this transition period. The techniques of ARCH, GARCH, E-GARCH, A-PARCH, and GARCH-M is employed in forecasting the conditional volatility of gold spot price from Multi Commodity Exchange (MCX) of India. A total of 3631 observations were collected from the daily spot prices of gold from January 2009 to December 2022. The findings show that the gold prices in India are highly persistent similar to other emerging markets and that gold will remain a safe haven for investors and institutional investors in the post-pandemic period. This paper is the first of its kind to forecast gold prices for the post-pandemic period. The forecast price of 10-gram gold is expected to trade for 65,948 ₹ in the Indian MCX by 2026 if the gold prices behold its previous momentum. This forecast will help the investors to plan their portfolio diversification for the post-pandemic period.