IDEAS home Printed from https://ideas.repec.org/a/spr/minecn/v32y2019i3d10.1007_s13563-019-00204-4.html
   My bibliography  Save this article

Revisiting gold price behaviour: a structural VAR

Author

Listed:
  • Zurika Robinson

    (UNISA)

Abstract

This article looks to shed some light on a fluctuating commodity price and gold production. In this regard, a structural vector autoregression (VAR) was applied to observe the sensitivity of the gold price and future pricing due to changes in macroeconomic variables, and also to review changes in macroeconomic variables due to changes in the gold (commodity) price. The variables used for decomposition were the gold price, the oil price, the real effective exchange rate of the United States (US), the US Federal funds rate, and the total combined gross domestic product (GDP) of the Organisation for Economic Co-operation and Development (OECD) countries. Impulse response functions, with shocks to each system, was investigated, and the forecast error variance decomposition was examined. The main results over a period of 10 years show that a shock to OECD GDP caused the gold price to increase, thus showing a positive correlation between economic output and the gold price. A shock to the oil price caused the gold price to spike over the short term, then move sideways over the long term. A shock to the US Federal funds rate caused the gold price to spike over the short term, then decrease slightly over the medium and long terms; while a shock to the real effective exchange rate of the US caused the gold price to be relatively flat and move sideways. The results show that the relationship between gold and other relevant factors are not just a simple monetary relationship as many previously assumed. The relationship between gold and oil is still dynamic, whereas exchange rate shocks might not be as significant as previously thought.

Suggested Citation

  • Zurika Robinson, 2019. "Revisiting gold price behaviour: a structural VAR," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 32(3), pages 365-372, November.
  • Handle: RePEc:spr:minecn:v:32:y:2019:i:3:d:10.1007_s13563-019-00204-4
    DOI: 10.1007/s13563-019-00204-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13563-019-00204-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s13563-019-00204-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yu-Chin Chen & Kenneth S. Rogoff & Barbara Rossi, 2010. "Can Exchange Rates Forecast Commodity Prices?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1145-1194.
    2. Jeffrey A. Frankel, 2008. "The Effect of Monetary Policy on Real Commodity Prices," NBER Chapters, in: Asset Prices and Monetary Policy, pages 291-333, National Bureau of Economic Research, Inc.
    3. Kaufmann, Thomas D. & Winters, Richard A., 1989. "The price of gold : A simple model," Resources Policy, Elsevier, vol. 15(4), pages 309-313, December.
    4. Batten, Jonathan A. & Ciner, Cetin & Lucey, Brian M., 2010. "The macroeconomic determinants of volatility in precious metals markets," Resources Policy, Elsevier, vol. 35(2), pages 65-71, June.
    5. Batten, Jonathan A. & Ciner, Cetin & Lucey, Brian M, 2014. "On the economic determinants of the gold–inflation relation," Resources Policy, Elsevier, vol. 41(C), pages 101-108.
    6. Issler, João Victor & Rodrigues, Claudia Ferreira & Burjack, Rafael, 2013. "Using common features to understand the behavior of metal-commodity prices and forecast them at different horizons," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 735, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    7. Mudd, Gavin M., 2007. "Global trends in gold mining: Towards quantifying environmental and resource sustainability," Resources Policy, Elsevier, vol. 32(1-2), pages 42-56.
    8. Issler, João Victor & Rodrigues, Claudia Ferreira & Burjack, Rafael, 2013. "Using common features to understand the behavior of metal-commodity prices and forecast them at different horizons," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 744, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    9. Issler, João Victor & Rodrigues, Claudia & Burjack, Rafael, 2014. "Using common features to understand the behavior of metal-commodity prices and forecast them at different horizons," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 310-335.
    10. Maponga, Oliver & Maxwell, Philip, 2000. "The internationalisation of the Australian mineral industry in the 1990s," Resources Policy, Elsevier, vol. 26(4), pages 199-210, December.
    11. Aguilera, Roberto F. & Radetzki, Marian, 2017. "The synchronized and exceptional price performance of oil and gold: Explanations and prospects," Resources Policy, Elsevier, vol. 54(C), pages 81-87.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zurika, Robinson, 2023. "A macroeconomic viewpoint using a structural VAR analysis of silver price behaviour," Working Papers 30192, University of South Africa, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robinson, Zurika, 2017. "Sustainability of platinum production in South Africa and the dynamics of commodity pricing," Resources Policy, Elsevier, vol. 51(C), pages 107-114.
    2. Rossen, Anja, 2015. "What are metal prices like? Co-movement, price cycles and long-run trends," Resources Policy, Elsevier, vol. 45(C), pages 255-276.
    3. Vasyl Golosnoy & Anja Rossen, 2018. "Modeling dynamics of metal price series via state space approach with two common factors," Empirical Economics, Springer, vol. 54(4), pages 1477-1501, June.
    4. Joseph P Byrne & Ryuta Sakemoto & Bing Xu, 2020. "Commodity price co-movement: heterogeneity and the time-varying impact of fundamentals [Oil price shocks and the stock market: evidence from Japan]," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 47(2), pages 499-528.
    5. Liu, Yang & Han, Liyan & Xu, Yang, 2021. "The impact of geopolitical uncertainty on energy volatility," International Review of Financial Analysis, Elsevier, vol. 75(C).
    6. Zurika, Robinson, 2023. "A macroeconomic viewpoint using a structural VAR analysis of silver price behaviour," Working Papers 30192, University of South Africa, Department of Economics.
    7. Antonakakis, Nikolaos & Kizys, Renatas, 2015. "Dynamic spillovers between commodity and currency markets," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 303-319.
    8. Buncic, Daniel & Moretto, Carlo, 2015. "Forecasting copper prices with dynamic averaging and selection models," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 1-38.
    9. Libo Yin & Jing Nie & Liyan Han, 2020. "Intermediary asset pricing in commodity futures returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1711-1730, November.
    10. Yang Liu & Liyan Han & Libo Yin, 2018. "Does news uncertainty matter for commodity futures markets? Heterogeneity in energy and non‐energy sectors," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(10), pages 1246-1261, October.
    11. Reinhard Ellwanger, Stephen Snudden, 2021. "Predictability of Aggregated Time Series," LCERPA Working Papers bm0127, Laurier Centre for Economic Research and Policy Analysis.
    12. Caldara, Dario & Cavallo, Michele & Iacoviello, Matteo, 2019. "Oil price elasticities and oil price fluctuations," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 1-20.
    13. Amélie Charles & Olivier Darné & Jae H. Kim, 2014. "Precious metals shine? A market efficiency perspective," Working Papers hal-01010516, HAL.
    14. Zuzanna Karolak, 2021. "Energy prices forecasting using nonlinear univariate models," Bank i Kredyt, Narodowy Bank Polski, vol. 52(6), pages 577-598.
    15. Mont'Alverne Duarte, Angelo & Gaglianone, Wagner Piazza & de Carvalho Guillén, Osmani Teixeira & Issler, João Victor, 2021. "Commodity prices and global economic activity: A derived-demand approach," Energy Economics, Elsevier, vol. 96(C).
    16. Bakas, Dimitrios & Triantafyllou, Athanasios, 2018. "The impact of uncertainty shocks on the volatility of commodity prices," Journal of International Money and Finance, Elsevier, vol. 87(C), pages 96-111.
    17. John Baffes & Damir Cosic, 2014. "Global Economic Prospects : Commodity Markets Outlook, January 2014," World Bank Publications, The World Bank, number 18996.
    18. Tapia, Carlos & Coulton, Jeff & Saydam, Serkan, 2020. "Using entropy to assess dynamic behaviour of long-term copper price," Resources Policy, Elsevier, vol. 66(C).
    19. D'Orlando, Fabio & Ferrante, Francesco, 2015. "The benefits of stabilization policies revisited," MPRA Paper 67321, University Library of Munich, Germany.
    20. John Baffes, 2014. "Global Economic Prospects : Commodity Markets Outlook, October 2014," World Bank Publications, The World Bank, number 20455.

    More about this item

    Keywords

    Gold; Mineral resources; Commodity prices;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:minecn:v:32:y:2019:i:3:d:10.1007_s13563-019-00204-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.