Reevaluating the Time-varying Safe Haven Status of Precious Metals: Novel Insights from Economic Policy Uncertainties in the USA and China

This study aims to examine whether the price exuberances in the prices of four main precious metals stem from their status as safe havens against economic uncertainty (proxied by the US EPU and Chinese CEPU indices). The findings reveal that the effects of both uncertainty measures on gold and silver prices, notably more pronounced in the case of the CEPU, persist for longer, particularly during the surge of uncertainty triggered by the COVID-19 pandemic. This finding highlights the safe-haven status of these metals, with a notable dominance of the CEPU in influencing the price dynamics of the gold and silver markets. However, as the observed price exuberances in gold and silver more closely align with periods of supply and demand imbalances, it is less likely that these movements are driven solely by investors seeking safe havens during times of uncertainty. Furthermore, the effect of the EPU on platinum and palladium prices is particularly pronounced during economic turmoil, whereas the effect of the CEPU is confined to the periods that coincide with price exuberances in these metals. In sum, this paper argues that the safe-haven status of individual precious metals is dynamic, and that price exuberances do not consistently originate from their safe-haven status.