Elsevier

Resources Policy

Volume 72, August 2021, 102025
Resources Policy

On the relation between Pandemic Disease Outbreak News and Crude oil, Gold, Gold mining, Silver and Energy Markets

https://doi.org/10.1016/j.resourpol.2021.102025Get rights and content

Highlights

  • This article examines the unprecedented overreaction of investors’ sentiment amid COVID-19 in the commodities market.

  • TThe deadly effects of DONs-COVID-19 in the commodities market have been the worst in history.

  • Covid-19 induced economic uncertainty has impacted severely through all commodities except the safe-haven Gold (GVZ).

  • Options-based volatility indexes (OVX, VXSLV, VXXLE) crossed the peak level that it was prevailing during the GFC-2008.

  • The remarkable upsurge of the implied volatility indexes across all commodities indicates higher demand for hedge funds.

Abstract

Fear of the disease outbreak news (DONs) has shocked commodity markets and raised the likelihood of economic uncertainty and recession globally. This article examines the unprecedented overreaction of investors sentiments in the commodities such as Crude oil, Gold, Gold Mining, Silver, and the Energy sector. The deadly effects of DONs-COVID-19 in the commodities market have been the worst in history; it appeared the first time higher than the common stock's volatility. Covid-19 induced economic uncertainty has impacted severely through all commodities except the safe-haven Gold (GVZ). Importantly, ETF Options based Implied Volatility Index of Crude (OVX), Silver (VXSLV), and Energy (VXXLE) stocks have crossed the peak level what it was prevailing during the global financial crisis 2008. The unparalleled upsurge of the implied volatility index across all commodities indicates higher demand for the hedge funds to protects the commodity portfolio. ETF options on the commodity act as the best hedge against market uncertainty. Overburden on the put option results in an increased risk premium, henceforth higher expected volatility. ETF options truly measure the investor's fear of predominant in the commodity market.

Keywords

Covid-19
Crude oil
Implied volatility index
Gold
Silver
Uncertainty

JEL classification

C22
G12
G14
Q02
Q48

Cited by (0)

View Abstract