Examining the Relationship between Gold and Stock Prices during COVID-19 Evidence from South Asian Stock Market

Abstract

This research inspects the role of gold during the COVID-19 epidemic as a harmless haven and a form of insurance against thirteen Asian stock marketplaces. Gold is demonstrated to be a powerful hedge (diversifier) for the majority (minority) of Asian stock markets during the COVID-19 sub-period; it represents the assets of a strong safe-haven in Thailand and a weak safe-haven in Pakistan, respectively. Before discussing likely ways that an individual may profit from a market that is impacted by a major viral pandemic, we investigate the potential stock market effects that the coronavirus "COVID-19" may have. The hedging effectiveness of most Asian stock markets is higher during the COVID-19 sub-period. Additional analysis reveals that inflation expectations and implied volatility for gold in both sub-periods frequently account for the majority of the returns on hedging portfolios. For market participants who hold assets in Asian companies during trying times, our findings have practical consequences. This research can help purchase the gold ETFs SPDR Gold Shares (NYSE: GLD) and iShares Gold Trust (NYSE: IAU) and then hold them until the price of gold reaches its high.