Escape from COVID-19 pandemic to safe haven

Area of Science:

• Economics
• Financial Markets
• Public Health Crises

Background:

• Gold is a traditional safe-haven asset, sought during economic uncertainty and crises.
• The COVID-19 pandemic created global uncertainty, increasing interest in gold as an investment.
• Turkey experienced heightened uncertainty, evidenced by rising 5-year CDS data, prompting investor shifts towards gold.

Purpose of the Study:

• To investigate the long-term relationship between daily COVID-19-related deaths and Turkish gram gold prices.
• To assess the impact of Turkey's 5-year CDS data on Turkish gram gold prices during the pandemic.
• To analyze these relationships within the specific timeframe of the COVID-19 pandemic.

Main Methods:

• Utilized daily data from March 17, 2020, to April 11, 2020.
• Employed the Autoregressive Distributed Lag (ARDL) bound test to examine long-term relationships.
• Conducted unit root tests, including Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP), to ensure variable stationarity.

Main Results:

• A statistically significant and positive long-term relationship was found between daily COVID-19-related deaths and Turkish gram gold prices.
• Turkey's 5-year CDS data did not exhibit a significant long-term relationship with Turkish gram gold prices.
• The ARDL bound test confirmed the cointegration between deaths and gold prices.

Conclusions:

• Daily COVID-19 fatalities were a significant driver of Turkish gold prices during the specified pandemic period.
• Turkey's sovereign credit default swap (CDS) spread was not a significant factor influencing gold prices in the long run.
• The study highlights the impact of health crises on safe-haven asset demand in emerging markets.