Conditional Dependence between Non-Ferrous Metals and Global Uncertainties: Insight from the Nickel Crash

Abstract

This century has seen rising uncertainties with varying chaos plunging the financial markets, including the industrial metal crash. Drawing insights from the nickel crash, we assessed the effect of the world uncertainty (WUI) on metals while assessing the role of market sentiments (VIX), oil-based volatility (OVX) and policy uncertainty (USPU) using weekly data from January 2016 to January 2024 through varying quantile regressions (QRs). The QR and quantile-on-quantile regression (QQR) revealed a mix of weak negative influence of WUI on most metals. While zinc and lead display marginally positive or mixed responses, these are statistically insignificant and inconsistent across quantiles. This pattern suggests that non-ferrous metals, contrary to common assumptions, offer limited hedging benefits during normal market conditions and do not consistently act as secure haven assets during periods of high unpredictability. The variation in metal-specific responses highlights their heterogeneous and adaptive nature, challenging the notion of a uniform haven status across the metal spectrum. The results also highlighted the insignificant impact of OVX and USPU on metals, except for VIX in the context of aluminum at the lower quantile, which was confirmed through QQR. Despite WUI’s mild effect on metals, it is pertinent to note its fluxes for investment purposes, particularly when uncertainty is elevated. These insights are relevant for investors, risk managers, regulatory bodies and commodity-dependent economies seeking to navigate volatility with a deeper knowledge of how metals behave in uncertain global markets.