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This study exploits multifractal cross-correlation analysis (MFCCA) to investigate the impact of the COVID-19 pandemic on the cross-correlations between gold and U.S. equity markets using 1-min high-frequency data from January 1, 2019, to December 29, 2020. The MFCCA method shows that the pandemic caused an increase of multifractality in cross-correlations between the two markets. Specifically, the cross-correlations of small fluctuations became more persistent while those of large fluctuations became less persistent, explaining the source of multifractality. The findings of this study carry significant implications for investors, academicians, and policymakers. For example, the increase of multifractality of cross-correlation means that the non-linear relationship between gold and U.S. equity returns prevails more during economic downturns. Therefore, academicians may resort to non-linear techniques to evaluate the relationship between gold and U.S. equity markets during the health pandemic. Moreover, investors can know the value of hedging benefits over different investment time horizons during the pandemic. Finally, policymakers can better assess the economic downturns (i.e., those caused by health pandemics) over the dynamics of cross-correlation between gold and equity markets to make sound financial policies.

The impact of COVID-19 pandemic on the dynamic correlations between gold and U.S. equities: evidence from multifractal cross-correlation analysis