Gamaliel Anindyajati, Arief Wibisono Lubis
This paper intends to investigate the dynamic relations between investor attention to gold, captured by Google search volume index (GSV), and gold price, Indonesian Composite Index (IHSG) and USD/IDR exchange rate, using multivariate Vector Autoregressive (VAR). Driven by previous findings from the USA & India that reveal causalities between GSV and gold return, we try to confirm whether it also took place in Indonesia and the reliance on GSV could be used as another strategy for gold investment. Our study covers both ongoing Covid-19 and pre-Covid-19 periods, from May 2016 to May 2021. Unlike previous findings, we find only one directional causality from gold return to GSV in all sample and pre-Covid-19 period. This result suggests that retail investors’ attention to gold in Indonesia is driven by recent changes in gold price, but not vice versa. Additionally, we also find bi-directional causality between gold and IHSG return, as well as gold and currency rate return, in all sample period. Thus, it suggests that gold price is driven more by its traditional relation with economic condition rather than investor attention, in particular stock market, where we find one directional causality from IHSG to gold return consistently in all three periods; whole sample, pre-Covid-19 and Covid-19 period.