The impact of COVID-19 on gold seasonality

ABSTRACT

This study investigates the impact of COVID-19 on the seasonality of gold returns by means of an asymmetric EGARCH model (Exponential GARCH). We find that the so-called ‘autumn effect’, or the traditional seasonal increase in gold returns in fall, vanishes and even shows a reverse pattern during the COVID-19 pandemic. We ascribe this phenomenon to the decaying demand for gold, which substantially decreased in the third quarter of 2020. In contrast, we find no evidence of seasonal effects in gold volatility, which is in line with earlier researches on this topic. Our results also confirm the positive asymmetric effect of gold volatility.

KEYWORDS:

• COVID-19 pandemic
• gold
• seasonality
• ‘autumn effect’
• market sentiment
• EGARCH models

JEL CLASSIFICATION:

• C58
• G01
• G15
• O16
• Q02

Acknowledgments

This work was supported by FCT, I.P., the Portuguese national funding agency for science, research and technology, under the Project UIDB/04521/2020; by BRU – Business Research Unit (IBS, Lisbon, Portugal); and by Instituto Politécnico de Lisboa as part of the IPL/2020/MacroRates/ISCAL and the IPL/2020/FIN/ISCAL projects . The article was prepared within the framework of the Basic Research Program at HSE University.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 These results of both tests are not reported here to save space but are available from the authors upon request.