Impact of COVID-19 First Official Vaccine Approval on Precious Metals: A Behavioral Finance Approach

Abstract

This research aims to reveal the effect of first official COVID-19 vaccine approval on precious metal prices in terms of return and volatility. Within the context of precious metal, gold, silver, platinum, and palladium are selected as dependent and US dollar index as independent variables. In order to measure the difference in the returns and volatilities before and after the first official approval of the COVID-19 vaccine, a dummy variable is defined. Analysis studies have been carried out with EGARCH models. According to the results, it is determined that the first official COVID-19 vaccine approval had negatively affected the level of volatility for gold and silver prices. The approval does not affect the volatility of platinum and palladium. Besides, a negative relationship is found between both all precious metals and the US dollar index in terms of returns. It is assumed that the results could be interpreted as investors acted by the risk aversion bias before the first official approval of the COVID-19 vaccine, and the approval created an effect of reducing uncertainty in the financial markets.