Economic Drivers of Volatility and Correlation in Precious Metal Markets
Journal of Commodity Markets, forthcoming. DOI: 10.1016/j.jcomm.2021.100242
36 Pages Posted: 2 Aug 2021 Last revised: 22 Jan 2022
Date Written: July 27, 2021
We investigate the time-varying dynamics of the precious metal markets. We employ a mixed data sampling technique to identify the impact of macroeconomic and financial drivers from G7 and BRICS countries on the daily volatility and pairwise correlation of gold, silver, platinum, and palladium. We find that the U.S. and Chinese economies especially influence the precious metal markets, but in opposite directions. Besides, the stock markets and trade balance of both G7 and BRICS countries as well as the consumer confidence of G7 countries are the key drivers for the volatility of precious metals. The most influential drivers for correlation are stock markets, money supply, and the inflation rate. Surprisingly, the economic policy uncertainty does not affect the dynamics as much as expected. Lastly, the global financial crisis 2008 affected the direction of most of the macroeconomic and financial drivers.
Keywords: Precious metals, long-term volatility \sep long-term correlation, macroeconomic drivers, financial drivers, economic policy uncertainty, mixed data sampling
JEL Classification: C58, G17,Q02
Suggested Citation: Suggested Citation