IMPACT OF GOLD PRICE MOVEMENT ON THE RATE OF THE RETURNS FROM INVESTMENT ACTIVITY ON FINANCIAL MARKETS

Abstract

Due to the consequences caused by the crisis of the COVID-19 virus pandemic (interrupted
supply chains), energy crisis, geopolitical crisis (war conflicts between Russia and Ukraine)
resulting in high inflation, the working paper analyzes, tests and quantifies the impact of gold price
movements on daily rates of return from investment activities on the observed financial markets of
America, Europe and China. The aim of the working paper is to arrive at concrete, practically
tested and quantified results through the application of multivariate GARCH models in the
function of quantifying the impact of the gold price on the yield rates of the observed financial
markets. Investing in gold represents an alternative to investing in currencies (currency pairs) and
financial instruments on the financial markets. The time period of the research is from 2012 to
2023, where the effectiveness of the application of the multivariate GARCH methodology is tested
in the period before the COVID-19 crisis, during and after the crisis. The research methodology
includes the use of SIC (Schwarz) information criteria for selecting optimal models. The results of
the working paper confirm the significance of the application of econometric multivariate GARCH
models in terms of quantifying the impact of the gold price on the daily rates of return from
investment activities on the observed financial markets. The obtained research results will be
useful both to the academic community for further research in the field, and to the professional in
terms of making optimal investment decisions.