Trade wars and gold market volatility: evidence from the world trade uncertainty index

This study investigates the impact of elevated trade policy, driven by trade wars, on gold market volatility within a GARCH-MIDAS framework. The effects of the World Trade Uncertainty Index (WTUI) and the U.S. and China Trade Policy Uncertainty (US TPU and CHN TPU) indices on the long-term gold price volatility are empirically examined. The empirical results indicate that increases in trade-related uncertainty significantly amplify the long-run component of gold volatility. Notably, the impact of WTUI exceeds that of widely used uncertainty indices documented in the existing literature. Out-of-sample forecasting results further demonstrate that WTUI delivers superior predictive performance. These findings underscore the pivotal role of trade policy uncertainty in shaping gold market volatility and provide important implications for investors and policymakers.