  A noteworthy feature of U.S. politics in recent years is serious partisan
conflict, which has led to intensifying polarization and exacerbating high
policy uncertainty. The US is a significant player in oil and gold markets. Oil
and gold also form the basis of important strategic reserves in the US. We
investigate whether U.S. partisan conflict affects the returns and price
volatility of oil and gold using a parametric test of Granger causality in
quantiles. The empirical results suggest that U.S. partisan conflict has an
effect on the returns of oil and gold, and the effects are concentrated at the
tail of the conditional distribution of returns. More specifically, the
partisan conflict mainly affects oil returns when the crude oil market is in a
bearish state (lower quantiles). By contrast, partisan conflict matters for
gold returns only when the gold market is in a bullish scenario (higher
quantiles). In addition, for the volatility of oil and gold, the predictability
of partisan conflict index virtually covers the entire distribution of
volatility.
