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

  • Shaun K. Roache
  • Marco Rossi
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    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
    Date of creation: 01 Jul 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/140
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    3. Lutz Kilian & Clara Vega, 2011. "Do Energy Prices Respond to U.S. Macroeconomic News? A Test of the Hypothesis of Predetermined Energy Prices," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 660-671, May.
    4. Kenneth W. Clements & Renee Fry, 2006. "Commodity Currencies And Currency Commodities," CAMA Working Papers 2006-19, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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    6. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2002. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," Working Papers 02-16, Duke University, Department of Economics.
    7. Yu-Chin Chen & Kenneth Rogoff & Barbara Rossi, 2008. "Can Exchange Rates Forecast Commodity Prices?," NBER Working Papers 13901, National Bureau of Economic Research, Inc.
    8. Scott W. Barnhart, 1989. "The Effects of Macroeconomic Announcements on Commodity Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 389-403.
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    16. Shaun K. Roache, 2008. "Commodities and the Market Price of Risk," IMF Working Papers 08/221, International Monetary Fund.
    17. 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.
    18. Payne, Richard, 2003. "Informed trade in spot foreign exchange markets: an empirical investigation," Journal of International Economics, Elsevier, vol. 61(2), pages 307-329, December.
    19. Jun Cai & Yan‐Leung Cheung & Michael C. S. Wong, 2001. "What moves the gold market?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(3), pages 257-278, 03.
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    21. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December.
    22. Marco Rossi, 1998. "Economic Announcements and the Timing of Public Debt Auctions," IMF Working Papers 98/44, International Monetary Fund.
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