How do the gold intra-day returns and volatility react to monetary policy shocks?

In this paper, we use high frequency data to obtain novel asymmetry results in the short-term response of gold to monetary policy shocks. The gold returns and volatility 5 min after the shock are found to be more sensitive to looser than tighter FOMC rate announcement changes. This is explained by the increased appeal of gold during uncertainties and as a safe haven following negative monetary shocks. The rally in gold prices is construed by the market as an increase in the demand for safe haven assets, and hence, a stronger response in gold returns and volatility ensues. Moreover, we find that the gold price adjustment and its volatility adjustment continue for longer than five minutes after the FOMC shock. This suggests potential short-term inefficiencies in the gold market concerning the short-term rates.