Assessing Gold´s Protective Properties During Market Stress- Evidence from U.S. and Swedish Markets

Sammanfattning

This thesis studies whether gold functions as a hedge, safe haven or a diversifier for equity investors in the United States and Sweden. Monthly return data covering the period from 2000 to 2024 are used to examine the relationship between gold, stock markets (S&P and OMXSPI), and oil. The analysis combines correlation measures with regression models based on stress indicators defined by the 10th and 5th percentiles of stock market returns. In addition, Vector Autoregression (VAR) models, impulse response functions, and Granger causality tests are employed to capture dynamic interactions between the assets. The empirical results provide little support for gold acting as either a hedge or a safe haven in the U.S. market. Gold returns are significantly negative during both moderate and extreme stock market downturns, indicating that gold tends to fall when U.S. equities decline. For the Swedish market, gold shows positive but statistically insignificant responses during stress periods, suggesting that it neither protects nor amplifies equity losses. Instead, gold appears to behave largely independently of the OMXSPI. The dynamic analysis confirms these findings, as gold does not respond significantly to negative stock market shocks in either country, while oil moves in line with the business cycle. Granger causality tests further show no predictive relationship between stock market returns and gold returns. Overall, the results indicate that gold does not function as a hedge or a safe haven in either market. Rather, its primary role is that of a diversifier, particularly in the Swedish context.