Testing the relationship between VIX fear index and global gold prices: Using Granger causality test

Abstract

This Paper aims to test the causal relationship between the Volatility Index (VIX) and global gold prices during the period from 4 January 2021 to 28 August 2025, using Granger causality testing within a vector autoregressive (VAR) model. The results indicate a unidirectional predictive causality from the VIX to gold prices, supporting gold's role as a hedging instrument during times of market uncertainty. The research recommends that investors and policymakers use the VIX as an early warning bell for potential market volatility, enabling them to adjust their investment strategies and manage risks effectively.