Climate policy uncertainty and its relationship with precious metals price volatility: Comparative analysis pre and during COVID-19

Climate change and its associated challenges have become pressing global concerns. This has necessitated policymakers and governments to take action by implementing climate policies to mitigate its effects. However, the uncertainty surrounding climate policies has caused adverse effects in several areas, particularly in the financial markets. Likewise, the precious metals market has traditionally been considered a haven for investors in times of economic crisis. However, with the ongoing changes in climate policies, the previously stable prices of precious metals have encountered unexpected fluctuations. This state leads us to question how climate policy uncertainty impacts the volatility of precious metals. Thus, this study is designed to delve into the association between climate policy uncertainty and the volatile nature of precious metals prices, focusing on a comparative analysis before and during the COVID-19 pandemic. An advanced technique, i.e., GARCH-MIDAS, has been employed for data analysis. The results illustrate that climate policy uncertainty significantly affects the price volatility of precious metals. The results also indicate that climate policy uncertainty significantly impacted precious metals price volatility during the COVID-19 pandemic, suggesting that price volatility of metals escalates during a crisis. It has been revealed further that platinum and palladium are the foremost precious metals with high fluctuation series. The findings of this research contribute to a deeper understanding of the proposed relationship, providing significant information for long-term investment strategies and developing policy in light of changing climate policies.