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

Author/Editor: Roache, Shaun K. | Rossi, Marco
Authorized for Distribution: July 1, 2009
Electronic Access: Free Full Text (PDF file size is 717KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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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Series: Working Paper No. 09/140
Subject(s): Announcements | Commodities | Commodity markets | Commodity price fluctuations | Commodity prices | Economic models | Exchange rates | External shocks | Financial assets | Gold | Public information
Author's keyword(s): Macroeconomic news | gold | volatility | exchange rates
 
English  
    Published:   July 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009140   Pages:   28
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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