Cryptocurrency policy uncertainty and gold return forecasting: A dynamic Occam's window approach

•Cryptocurrency policy uncertainty is used to forecast gold returns.•Dynamic Occam's window method is proved to be superior to DMA and DMS.•UCRY policy has better predictive power than many commonly used gold predictors. The inherent relationship between gold and cryptocurrency has been verified for a long time. However, no research has explored the possible predictive ability of cryptocurrency market information on the gold market returns. Using a newly developed cryptocurrency policy uncertainty index (UCRY Policy) and an efficient forecasting method, named Dynamic Occam's Window (DOW), this paper identifies and compares the predictive power of UCRY Policy with many traditional predictors for the gold market. Our empirical results show that UCRY Policy does have good predictive power in forecasting weekly gold returns, and it is superior to many commonly used predictors throughout a data sample from 2014 to 2022. Moreover, the DOW method with various thresholds can outperform dynamic model averaging/selection (DMA/DMS) and many other conventional econometric models in forecasting weekly gold returns.