In summary, gold is positively correlated with geopolitical problems. Although gold serves as a safe haven, the importance of geopolitical concerns for the gold market is often overstated (so buying gold right away may not be wise because geopolitical risk increases). We use the bootstrap subsampling method to determine the causal link between Russian geopolitical risk (RGR) and the price of gold (GP) according to Granger. The predictability results within the sample suggest contrasting effects of self-risk and oil tail risk (an approximate value for the global risk factor), with negative and positive effects on gold returns, which strengthens the safe haven nature of the gold
market compared to global risk.
According to the data, following major global instabilities between 1970 and 1993, the price of gold would rise on average by 1% one week after the event, 5% one month later, 12% two months later and 16% three months later. Unlike ordinary assets, gold plays the role of maintaining value, which is why investors prefer gold investments when the risks are greater. Geopolitical events no longer have the same impact on the price of gold as in the past; instead, macroeconomics is the dominant driver, according to a recently published RBC report. This dynamic approach allows us to observe the dynamic development of the effects of the GPR and the price of gold.
This paper examines the connection between the geopolitical situation in Russia and the international gold market and further examines whether Russian geopolitics can stimulate the gold market. However, as emerging markets and financial markets have developed rapidly, their influence on gold and other commodity markets has increased, and it is more likely that the GPR will impact gold in
emerging markets.
