Is gold a safe haven for the U.S. dollar during extreme conditions?

This paper examines whether gold can act as a hedge/safe-haven asset for the U.S. dollar exchange rate risk against a broad range of currencies. Findings imply the important exchange rate hedging role of gold. Moreover, gold acts as a safe-haven asset during the COVID-19 pandemic and the Russia-Ukraine war for some exchange rate pairs examined. Analysis of gold-currency portfolios reveals that including an optimized amount of gold reduces portfolio variance during the COVID period but produces mixed findings during the war. These findings are robust against additional tests accounting for different holding periods for gold and asymmetries in the relationship between gold and exchange rate returns. Our results offer important implications for international investors and policymakers concerned with the U.S. dollar's exchange rate risk.