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The Effects of Economic News on Commodity Prices: Is Gold Just Another Commodity?

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Author Info
Shaun K. Roache
Marco Rossi
Abstract

The paper uses an event study methodology to investigate which and how macroeconomic announcements affect commodity prices. Results show that gold is unique among commodities, with prices reacting to specific scheduled announcements in the United States and the Euro area (such as indicators of activity or interest rate decisions) in a manner consistent with gold's traditional role as a safe-haven and store of value. Other commodity prices, where such news is significant, exhibit pro-cyclical sensitivities and these have risen somewhat as commodities have become increasingly financialized. These results are important for those trading in the commodity markets on a frequent basis and long-term market participants that take their decisions based on information on price fundamentals, which are reflected in the release of macroeconomic announcements.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/140.

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Length: 28 pages
Date of creation: 10 Jul 2009
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Handle: RePEc:imf:imfwpa:09/140

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Related research
Keywords: Announcements ; Commodities ; Commodity markets ; Commodity price fluctuations ; Commodity prices ; Economic models ; Exchange rates ; External shocks ; Financial assets ; Gold ; Public information ;

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  13. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October. [Downloadable!] (restricted)
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  16. Gabriele Galati & Corrinne Ho, 2003. "Macroeconomic News and the Euro/Dollar Exchange Rate," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 32(3), pages 371-398, November. [Downloadable!] (restricted)
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