Exploring the Speed of Adjustment in Gold Price Volatility Risk with Brent Oil, Silver, Interest Rates

Abstract.

This study delves into the nuanced exploration of the velocity of adjustment in gold price volatility risk (GPs), interwoven with Brent oil (Oil), silver prices (SPs), and interest rates (InT). The dataset, encompassing 4789 daily entries spanning from March 1, 2006, to October 22, 2024, was meticulously curated from reputable sources like the World Bank. Through rigorous statistical analyses, key independent variables were sieved out using tests for multicollinearity such as Variance Inflation Factor (VIF) and Tolerance, alongside multiple regression frameworks including Ordinary Least Squares (OLS), Fixed Effect, and Random Effect models. The study's revelations stand firm: a conspicuous absence of multicollinearity, substantiated by VIF values comfortably below 10 and Tolerance nearing one. Moreover, the input variables exhibit a significant positive effect on the output variable, GPs. Notably, the Error Correction Model (ECM) unveils that the pace of adjustment in gold price volatility risk demands a patient span of 811 days (equivalent to 2.25 years) to revert to its long-term trajectory post shock. These discoveries underscore the efficacy of the proposed forecasting model, heralding it as a promising tool for applications within the gold market.​