Not all Gold Shines in Crisis Times - COVID-19 Evidence

Abstract

This paper analyses the impact of the coronavirus pandemic on the share prices of gold firms, whose activities are spread across gold exploration, project development and gold mining with markedly different risk characteristics. We find evidence for COVID-induced stock market contagion leading to a decoupling of gold companies from the price of gold illustrating that gold shares are not a safe haven. The equity market and gold exposures differ significantly between explorers, developers and producers in normal times and are higher and more similar in crisis times. Our findings demonstrate that investors treat different firms differently in normal times and more equally in crisis times leading to mispricing and profit opportunities.

Keywords: gold, gold shares, safe haven, COVID-19, crises, contagion

JEL Classification: G01, G02, G12, G14, Q30