Abstract:
Using data that cover the annual period from 1258 to 2023, we studied the link between
real gold returns and climate risks. We documented a positive contemporaneous link and a negative
predictive link. Our findings further show that the predictive link historically gave rise to significant
out-of-sample forecasting gains. The positive contemporaneous link is consistent with the view that
investors viewed gold as a safe haven in times of elevated climate risks. The negative predictive link,
in turn, is consistent with an overshooting scenario in which the real gold price overshot in response
to climate risks, only to return subsequently to a lower value. Our findings should provide important
implications for investors and policymakers, given that our analysis covered the longest possible
data sample involving the gold market, and hence, was independent of any sample selection bias.
