COVID-19 Pandemic and Its Influence on Safe Havens: An Examination of Gold, Silver, and Platinum

Introduction

The international financial markets have seen a succession of major setbacks in recent months, triggered by the Covid-19, followed by a series of collapses, the oil war, and currency fluctuations. The economic turbulence associated with the coronavirus pandemic in 2019-2020 has serious repercussions on financial markets, particularly in the stock, bond and commodity markets (Sudha, Sornaganesh and Sathish, 2020).

There is no numerically specific definition of a crash in a stock market, but the term commonly applies to falls of more than 10%, over a period of several days. During the week of February 24-28, 2020, stock markets broke down due to the evolution of the Covid-19 pandemic. The FTSE 100 fell 13%, while the DJIA and S&P 500 Index fell 11-12% respectively, which represents the biggest weekly drop since the 2007-2008 financial crisis. On Monday, March 9, 2020, following the launch of the oil price war between Russia and Saudi Arabia in 2020, the UK and other European stock markets fell by almost 8%. Asian markets fell sharply, and the S&P 500 index fell 7.60%, while Italy’s FTSE MIB fell 11.17% (2,323.98 points). On March 12, 2020, the day after President Donald Trump announced Europe’s travel ban, stock prices fell sharply again. The DJIA fell 9.99%, the biggest daily drop since Black Monday (1987), despite the Federal Reserve announcing it would inject $1.5 trillion into money markets. The S&P 500 and NASDAQ each fell about 9.5%, while the main European stock market's fell more than 10%. On March 16, 2020, after it became clear that the recession was inevitable, the DJIA fell 12.93% (2,997points). This was the biggest drop since Black Monday (1987), surpassing the fall of the previous week. The NASDAQ Composite fell 12.32% and the S&P 500 index fell 11.98% (Akhtaruzzaman, Boubaker, Lucey, and Sensoy, 2020; Ali, Alam, and Rizvi, 2020; Okorie and Lin, 2020; Yan, Logan, Tu, and Zhang, 2020; Chappelow, 2020).

Considering these events, this chapter aims to analyze the rebalancing of portfolios in the financial markets of China (SHCOMP), Hong Kong (HSI), Malaysia (KLSE), Singapore (TRX SGP), Indonesia (TRX IDP), Japan (JPNK 400), Philippines (PSEi), Thailand (SET), South Korea (KOSPI), Gold (Bullion (Zurich) kg (995) CHF), Silver (Paris Spot E/KG), Platinum (Paris Spot E/KG) from September 2, 2019 to September 2, 2020. To carry out this analysis, different approaches were undertaken, and two main research questions were defined in order to answer if: (i) Gold, Silver, and Platinum will be a safe haven for portfolio rebalancing in Asian markets? (ii) the global pandemic (Covid-19) increased persistence in the financial markets under analysis? The results suggest that the Platinum market is not a safe haven for portfolio rebalancing in these regional markets, while the Silver market is also not a safe haven, but only for the Malaysia (KLSE) and South Korea (KOSPI) markets. As far as Gold market is concerned, we did not find strong _, which may induce that it could work as a safe haven for these regional markets, during the global pandemic crisis. The Exponents Detrended Fluctuation Analysis (DFA) show sharp long memories, with the exception made to the Gold market that shows signs of balance.