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

29 Pages Posted: 4 Aug 2009  

Shaun K. Roache

International Monetary Fund (IMF)

Marco Rossi

International Monetary Fund (IMF)

Date Written: July 2009

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.

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

Suggested Citation

Roache, Shaun K. and Rossi, Marco, The Effects of Economic News on Commodity Prices: Is Gold Just Another Commodity? (July 2009). IMF Working Papers, Vol. , pp. 1-28, 2009. Available at SSRN: https://ssrn.com/abstract=1442242

Shaun K. Roache (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Marco Rossi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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