ABSTRACT
The aim of this study is to examine dynamic relationship among the prices of four precious metals (gold, silver, platinum, and palladium), oil price,
and the US dollar/euro exchange rate. Recent literature for precious metals (gold, silver, platinum, palladium) and oil depict a lot contradiction
results of their nexus in the long and short runs. So that, there is still much to investigate and learn about their relationship between them and with
the exchange rate. The monthly data span from January 1990 to October 2021 is utilized, the study applies the co-integration analysis, multivariate
Granger causality test and Variance Decomposition (VDC) analysis. The result shows the evidence of a long-run equilibrium relationship but weak
feedbacks in the short run. The precious metal markets respond significantly (but temporarily) to a shock in any of the prices of the other metal prices
and the exchange rate. Furthermore, we discover some evidence of market overreactions in the palladium and platinum cases as well as in the oil
market. The study implies whether there are overreactions and re-adjustments or not, investors may diversify at least a portion of the risk away by
investing in precious metals, oil, and the euro.
Keywords: Precious Metal Prices, Oil Prices, Generalized Variance Decompositions
JEL Classifications: C53, O13, P28