Co-movements and spillovers between prices of precious metals and non-ferrous metals: A multiscale analysis

This study examines the co-movements between price returns of precious metals (gold and silver) and nonferrous metals (aluminium, copper, Lead and zinc). To do this, we use the spillover index developed by Die-bold and Yilmaz (2012) and various wavelet. The results show that aluminum is the highest contributor to shocks in the other metal markets whereas Lead and copper are the least contributors. Moreover, silver, copper, zinc and Lead are net receivers of shocks while gold and aluminium are net contributors to shocks in the other markets. In addition, the trajectory of the spillover index among all metals under investigation is influenced by economic crises. On the other hand, the results of wavelet methods reveal strong co-movements between precious and non-ferrous metals under medium and low frequencies where gold and silver are leading the non-ferrous metals. Besides, precious metal-non-ferrous metal pairs are in phase. The results show strong multiscale co-movements among non-ferrous metals. Gold offers better diversification benefits to non-ferrous metals under 2-4 days. The diversification benefits decrease as scale rise. These findings are interesting and entail significant implications to investors, portfolio managers, and policy-makers to inform their decision- making.