This study examines the conditional volatility and correlation dependency and interdependency for the four major precious metals (that is, gold, silver, platinum and palladium), while accounting for geopolitics within a multivariate system. The implications of the estimated results for portfolio designs and hedging strategies are also analyzed. The results for the four metals system show significant short-run and long-run dependencies and interdependencies to news and past volatility. These results have become more pervasive when the exchange rate and FFR are included. Monetary policy also has a differential impact on the precious metals and the exchange rate volatilities. Finally, the applications of the results show the optimal weights in a two-asset portfolio and the hedging ratios for long positions.

Additional Metadata
Keywords correlation, dependency, exchange rates, hedging, interdependency, multivariate, precious metals, shocks, volatility
JEL Time-Series Models; Dynamic Quantile Regressions (jel C32), General Financial Markets: General (jel G10)
Publisher Erasmus School of Economics (ESE)
Persistent URL
Series Econometric Institute Research Papers
Journal Report / Econometric Institute, Erasmus University Rotterdam
Hammoudeh, S.M, Yuan, Y, McAleer, M.J, & Thompson, M.A. (2009). Precious Metals-Exchange Rate Volatility Transmissions and Hedging Strategies (No. EI 2009-38). Report / Econometric Institute, Erasmus University Rotterdam (pp. 1–43). Erasmus School of Economics (ESE). Retrieved from