Does extreme climate change drive the connectedness among global gold markets? Evidence from TVP-VAR and causality-in-quantiles techniques

With climate change increasingly becoming a major fact in financial market turmoil, this study examines the impact of extreme climate change on the connectedness among global gold markets. We utilize the TVP-VAR model to examine the connectedness and marginal risk spillover and the causality-in-quantiles test to reveal the causality. Our findings show that there exists strong connectedness among global gold markets. The gold markets of China, the U.S. and India are spillover transmitters, while the gold markets of Russia, the Euro Area, Turkey, Australia and South Africa are spillover receivers. Then marginal risk spillover results show that heterogeneity in the impacts from different periods of extreme climate, and the gold markets of the Euro Area and Russia are risk transmitters. Finally, the causality results show that extreme climate change significantly affects the spillovers among global gold markets and there exists heterogeneity in the impact of extreme climate change on gold markets of different countries (regions). Appropriate implications for policymakers and investors can be drawn from these findings. •There exists strong connectedness among global gold markets.•There are significant marginal risk spillover effects during the El Niño period.•Extreme climate change significantly affects the spillovers among global gold markets.•There exists heterogeneity in the impact of extreme climate change on different gold markets.