Role of precious metals in global risk dynamics: Exploring their impact from a connectedness approach

In this research, we investigate the dynamic relationship between global volatility, as measured by Common Volatility (COVOL), and major precious metals. Utilising the popular Time-Varying Parameter Vector Autoregression (TVP-VAR) model, we uncover distinctive and complex interconnectedness that respond sharply to key global events. Our findings indicate that COVOL typically acts as a volatility receiver from precious metals, revealing that global market volatility is significantly influenced by fluctuations in the precious metals market with pronounced spillover effects experienced during major economic, financial and geopolitical events, underscoring the intricate interplay between global volatility and precious metal values. This research not only deepens our understanding of the global financial landscape but also provides critical insights for policymakers and investors navigating these markets.