The Impact of Macroeconomic Volatility on Gold Price Volatility: A Study in Vietnam

Abstract

This study examines the asymmetric impact of macroeconomic volatility on gold price volatility in Vietnam, focusing on inflation, interest rates, exchange rates, and global gold prices. Unlike prior research centered on developed markets with assumptions of symmetric price responses, this paper addresses the unique dynamics of Vietnam’s gold market, where gold functions both as a commodity and quasi-financial asset, within a tightly regulated environment. A key institutional factor is Decree 24, introduced by the State Bank of Vietnam in 2012 to curb speculation, stabilize prices, and centralize gold trading. While initially effective, its long-term efficacy remains uncertain, particularly in the face of global disruptions such as the COVID-19 pandemic. Using an Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model, the study analyzes monthly data from January 2007 to May 2023 across three phases: pre-Decree 24, post-Decree 24, and during COVID-19. The model captures volatility persistence and asymmetric responses of gold prices to macroeconomic shocks. Findings show that global gold prices consistently influence Vietnam’s gold price volatility, though this linkage weakens post-Decree 24, reflecting partial market insulation. Inflation becomes a more prominent driver of volatility in the regulated period, underscoring gold’s inflation-hedging role. Interest and exchange rates exhibit limited effects, and the COVID-19 period reveals heightened vulnerability, raising concerns over the rigidity of the existing regulatory regime. These results suggest the need for a more adaptive policy framework to balance market stability with responsiveness. The study contributes to emerging market literature by integrating regulatory context with asymmetric macroeconomic analysis.