WP/09/140 The Effecs of Economic News on Commodiy Prices: Is Gold Jus Anoher Commodiy? Shaun K. Roache and Marco Rossi
1 2008 Inernaional Moneary Fund WP/09/140 IMF Working Paper Research Deparmen The Effecs of Economic News on Commodiy Prices: Is Gold Jus Anoher Commodiy? Prepared by Shaun K. Roache and Marco Rossi 1 Auhorized for disribuion by Thomas Helbling July 2009 Absrac 1 This Working Paper should no be repored as represening he views of he IMF. The views expressed in his Working Paper are hose of he auhor(s) and do no necessarily represen hose of he IMF or IMF policy. Working Papers describe research in progress by he auhor(s) and are published o elici commens and o furher debae. The paper uses an even sudy mehodology o invesigae which and how macroeconomic announcemens affec commodiy prices. Resuls show ha gold is unique among commodiies, wih prices reacing o specific scheduled announcemens in he Unied Saes and he Euro area (such as indicaors of aciviy or ineres rae decisions) in a manner consisen wih gold s radiional role as a safe-haven and sore of value. Oher commodiy prices, where such news is significan, exhibi pro-cyclical sensiiviies and hese have risen somewha as commodiies have become increasingly financialized. These resuls are imporan for hose rading in he commodiy markes on a frequen basis and long-erm marke paricipans ha ake heir decisions based on informaion on price fundamenals, which are refleced in he release of macroeconomic announcemens. JEL Classificaion Numbers: G12, G13, G14, F31 Keywords: Macroeconomic news, gold, volailiy, exchange raes Auhor s E-Mail Address: sroache@imf.org, mrossi@imf.org 1 Excellen research assisance from Richard LaRock, formerly a he IMF, is grealy appreciaed. We would like o hank Andy Berg, Kevin Cheng, Thomas Helbling, Ydahlia Mezgen, Robero Perrelli, David Romer, and seminar paricipans from he Finance and Research deparmens for helpful commens and suggesions. The usual disclaimer applies.
2 Table of conens I. Inroducion... 3 II. Mehodology... 3 A. Lieraure Review... 3 B. Daa... 6 C. Esimaion Sraegy...8 III. Resuls... 11 A. Scheduled Macroeconomic Announcemens... 11 B. Good News, Bad News, and Volailiy... 15 IV. Conclusion... 16 References... 18 Appendix... 20
3 I. INTRODUCTION Commodiy prices have no been immune o he recen proraced period of financial urmoil. For some commodiies, he pro-cyclical naure of demand has driven price moves, while for gold, he crisis has underscored is role as a safe-haven asse and sore of value. Insighs on how commodiy and gold prices move and reac o news, paricularly in his conex of higher volailiy, can shed ligh on he macroeconomic facors ha drive shor-erm price paerns. This is useful for hose rading in hese markes on a frequen basis and also for long-erm marke paricipans ha ake heir decisions based on price fundamenals, which may be refleced in he release of macroeconomic informaion. Using an even sudy mehodology ha has been used successfully for asse prices, his paper invesigaes which and how relevan macroeconomic announcemens affec commodiy prices. Our focus is on scheduled and periodic (raher han ad hoc) macroeconomic daa releases. The fac ha he iming of such announcemens is known in advance makes he release of poenially price-sensiive informaion a poenially key facor ha raders may wish o consider when effecing ransacions. Reflecing is special role in he inernaional financial sysem, we conras he behavior of gold and we find ha i behaves very differenly o oher commodiies. Gold prices reac o specific scheduled announcemens in he Unied Saes and he Euro area (such as indicaors of aciviy or ineres rae decisions) in a manner consisen wih is radiional role as a safe-haven and sore of value. In conras, oher commodiy prices, where such news is significan, exhibi pro-cyclical sensiiviies, albei much less han financial asses. The paper is organized as follows. Secion II reviews he lieraure, he daa, and presens he mehodology. Secion III repors and discusses he resuls, while Secion IV concludes. II. METHODOLOGY A. Lieraure Review Asse prices and macroeconomic announcemens Previous lieraure on he impac of macroeconomic announcemens has mosly focused on bond and currency markes, wih fairly clear evidence ha macroeconomic news has significan price and volailiy effecs. Rossi (1998) finds ha cerain key economic announcemens cause U.K governmen bond yield changes of beween 2 6 basis poins, including beyond he rading day. Fleming and Remelona (1999) find ha he arrival of public informaion has a large effec on prices and subsequen rading aciviy, paricularly during periods in which uncerainy (as measured by implied volailiy) is high. Balduzzi, Elon, and Green (2001) indicae ha a wide variey of economic announcemens affec U.S. Treasury bond prices, wih labor marke, inflaion, and durable goods orders daa having he larges impac.
4 Commodiies are no financial asses, bu hese resuls are relevan for our sudy given he relaionship beween commodiy prices and some financial asse valuaions. Frankel (2008) argues ha ineres raes can have a significan effec on commodiy prices and Roache (2008) provides supporing empirical evidence. The sronges and mos consisen relaionship, however, is beween he U.S. dollar and commodiy prices, and here is a building consensus ha macroeconomic news does affec exchange raes. Andersen e al (2002) explore he relaionship beween macroeconomic news and he U.S. dollar exchange rae agains six major currencies. They confirm macroeconomic news generally has a saisically significan correlaion wih inra-day movemens of he U.S. dollar, wih bad news for example, daa indicaing weaker-han-expeced growh having a larger impac han good news. Galai and Ho (2003) found similar resuls using daily daa. Ehrmann and Frazscher (2005) focused on he euro-dollar exchange rae and found ha U.S. news ended o have more of an effec on he exchange rae han German news. Aciviy indicaors such as GDP and labor marke daa had a paricularly large and significan effec, wih he news impac increasing during imes of high marke uncerainy. A focus on commodiies and gold Common hemes have emerged from he lieraure focused on commodiies and announcemens (Table 1). The number and significance of macroeconomic announcemens on commodiy prices is lower han ha for U.S. Treasury bonds, exchange raes, and equiy markes. However, a number of key U.S. indicaors, including inflaion, GDP, and employmen saisics, repeaedly show he abiliy o move some commodiy prices; in general, energy producs have ended o be less sensiive, while gold has been mos sensiive. In general, earlier sudies, summarized in Table 1, based on sample periods in he 1980s and 1990s confirm he convenional wisdom ha gold is a hedge agains higher inflaion and economic uncerainy. For example, gold prices end o rise if U.S. inflaion and oupu unexpecedly increase, or if he labor marke ighens by more han he marke projecs (Ghura (1990) and Chrisie-David, Chaudry and Koch (2000)). Gold also appears sensiive o news relaed o supply and demand. In paricular, some sudies indicae ha cenral bank announcemens regarding sales of gold reserves have ended o cause price declines see Cai, Cheung, and Wong (2001). Oher sudies have found ha gold s sensiiviy o news varies hrough ime, wih Hess, Huang, and Niessen (2008) presening evidence ha i is dependen upon he sae of he economy, wih sensiiviy increasing during recessions.
5 Table 1. Sudies of Gold and he Impac of Macroeconomic Announcemens Sudy Daa and Mehod Resuls Frankel Daily reacions of nine Gold and oher commodiies negaively relaed. and Hardouveli commodiies o U.S. money supply announcemens 1 percenage poin posiive shock in he money supply leads o a 0.7 percen decline in gold. s (1985) from 1980-1982. Auhors conend ha hese resuls indicae ha he marke, following a posiive money supply surprise, anicipae quick Fed acion ha would lead o a ighening in policy. Barnhar (1989) Ghura (1990) Chrisie- David, Chaudhry, and Koch (2000) Cai, Cheung, and Wong (2001) Sensiiviy of 15 commodiy fuures prices on he surprise componen of announcemens for 12 U.S. economic variables. OLS single equaion and SUR sysem esimaions using daily daa from 1980-1984. Regression of daily commodiies fuures price on 14 U.S. macroeconomic announcemens from 1985-89, wih an unspecified correcion for heeroscedasiciy. Sensiiviy of gold and silver fuures prices over 15 minue inervals o 23 U.S. macroeconomic news announcemens from 1992-1995. OLS esimaions. Regression of 5 minue gold fuures prices on 23 U.S. macroeconomic announcemens over 1994-97. Two-sep esimaion using GARCH and a flexible Fourier form o capure smooh inraday paerns. Rejecs hypohesis ha all parameers are equal o zero for jus four commodiies, including gold. Jus wo announcemens were significan for he gold price: he M1 money aggregae wih a negaive coefficien; and he Federal Reserve surcharge rae indicaing ha a surprise 100 basis poin increase in he rae would lead o a fall in he gold price of nearly 1 percen. Similar resuls obained from esimaes for he meals sub-group including gold, silver, and copper wih Fed Discoun Rae announcemens also significan. Gold sensiive only o employmen repors, wih posiive surprise leading o higher price; no significan effec from inflaion or aciviy. Resuls may be biased lower by inclusion of oher financial variables (e.g. exchange raes) as regressors. Formal variance ess show gold and silver price volailiy is higher during days in which here are announcemens. Meals prices are sensiive o a fewer number of announcemens han bond fuures. GDP, inflaion, and capaciy uilizaion are all significan, wih he expeced posiive sign. Clear evidence of GARCH effecs in inraday prices. Six of he larges 25 absolue reurns associaed wih cenral banks selling of gold reserves. Number and significance of announcemens lower for gold han for bonds or currencies. Coefficiens on mos announcemens had he correc sign, wih hree saisically significan: employmen repors, inflaion, and GDP.
6 Sudy Daa and Mehod Resuls Hess, Huang, and Niessen (2008) Kilian and Vega (2008) OLS regression of wo commodiy indices he CRB and Goldman Sachs index on 17 U.S. macroeconomic announcemens using daily daa from 1989 o 2005. Regressions of WTI crude oil and U.S. gasoline prices on 30 U.S. macroeconomic announcemens using daily daa from 1983 o 2008. Commodiies sensiive o far fewer announcemens han eiher bonds or equiies. Impac of news on prices is dependen upon he sae of he economy. Uncondiionally, only inflaion surprises are saisically significan, alhough heir economic impac is very small. Condiioning resuls on he NBER-defined business cycle shows ha he effec of announcemens increases during recessions. Surprise news on GDP, payrolls, and reail sales are significan (small), wih he expeced posiive sign. No evidence of saisically significan responses of eiher oil or gasoline o U.S. macroeconomic news a daily horizons. Some evidence ha a broad se of seleced forwardlooking indicaors were saisically significan over a horizon of one monh. Economic significance of leading indicaors was low, wih minimal explanaory power. Source: Auhors. Commodiy prices B. Daa We use daily price daa for 12 commodiy fuures conracs ha have available price daa over he period from January 1997 o June 2009. We have included precious meals, base meals, energy, and agriculural commodiies (see Appendix Table A1 for deails). Fuures prices are aken from he neares conrac ofen used as he benchmark for ha commodiy and raded on exchanges in he Unied Saes. We focus on he fuures marke, raher han he spo marke, for wo reasons. Firs, he spo marke for some commodiies, including cerain precious and base meals, is dominaed by rading in London, which means ha official fixing prices have less ime o respond o daily developmens in he Unied Saes due o he five hour ime difference. 2 Second, spo prices are ofen posiively correlaed wih he fuure wih a one-day lag, which indicaes ha he impac of U.S. announcemens on he fuures price is likely o affec he spo price he 2 For example, he London Bullion Marke Associaion s fixing price is deermined by an open process a which marke paricipans can ransac business on he basis of a single quoed price, which is adjused unil he marke clears. The fixing is conduced wice a day a 10:00am and 3:00pm London ime.
7 following day (see he example for gold in Table 2). This is consisen wih previous research indicaing ha commodiies fuures markes lead developmens in spo markes (e.g. Anoniou and Foser (1992) and Yang, Balyea, and Leaham (2005)). Table 2. Gold Fuures and Spo Prices Correlaion Marix 1/ Gold fuure Same day. Previous day Gold Gold spo U.S. dollar fuure Gold spo U.S. dollar Gold fuure 1.00 0.26-0.44 0.02-0.02 Gold spo 0.26 1.00-0.19 0.72-0.06-0.31 U.S. dollar -0.44-0.19 1.00-0.03 0.01-0.01 Source: Auhors esimaes. 1/ Correlaion coefficiens in bold are significan a he 5 percen level. While many recen announcemen sudies use inraday daa, we use daily daa, finding he argumens of Erhmann and Frazscher (2005) in suppor of daily frequencies o be convincing. They noe ha Payne (2003) provides evidence of liquidiy effecs causing rades during he minues following a news even ha are no necessarily a response o he fundamenal conen of ha news e.g. rades based on paricipans covering a shor posiion o reduce risk. Also, i may ake longer han a few minues for markes o absorb he significance of news evens. For many commodiies, which are ofen perceived o reac o he response of oher financial variables such as exchange raes (see below), his may be paricularly relevan. The main objecion o daily daa ha i is noisy and pollued wih many oher marke evens is a minor concern if we make he reasonable assumpion, based on efficien marke assumpions, ha non-announcemen shocks on he release daes of specific repors are whie noise and unbiased. Macroeconomic announcemens Commodiy prices, in common wih financial asses, incorporae expecaions regarding he fuure. As a resul, he impac of news announcemens should focus on he surprise componen of he news. A popular echnique, which we use here, is o measure he surprise by he disance beween he acual ouurn X and he publicly-observable consensus esimae E -1 (X ), scaled by he sample esimae of he variaion in he announcemens σ X. The surprises may be inerpreed as sandard deviaions from he consensus:
8 Z i X E X ( X ) i 1 i = (1) σ We use he analys consensus esimaes published by Bloomberg for each announcemen and selec a se of 13 monhly or quarerly U.S. macroeconomic announcemens from hose included by Ehrmann and Frascher (2005), wih some subsiuions, including he Employmen Cos Index and Exising Home Sales (see Table A1). We focus mainly on announcemens abou U.S. macroeconomic developmens since hese have been shown o have he greaes influence on variables such as he U.S. dollar. However, we also include ECB and Bank of England ineres rae decisions and he German IFO business climae survey; he IFO indicaor was he only Euro area indicaor shown o influence he U.S. dollar Euro exchange rae in Ehrmann and Frascher (2005). Commodiies are raded globally and news from oher emerging economies, paricularly China given he growh in is demand across a wide range of producs, may also influence prices. For now, he number of observaions available o assess formally he impac of Chinese macroeconomic announcemens is limied, which makes us cauious abou heir inclusion. However, his clearly remains a ferile area for fuure research. C. Esimaion Sraegy The problem wih ordinary leas squares (OLS) The simples way o assess he significance of specific announcemens is by esimaing regressions in which he log change in he fuures price Δp is he dependen variable, J surprise elemens of he news announcemens Z i including K -1 lags, and L lags of he price reurn are he exogenous variables, and ε is he unexplained porion of he price reurn: J K Δp = α + β Z + λ Δp + ε ( 0 ) ε ~,σ j = 1 k = 0 jk j k L l = 1 l l (2) This may be esimaed using OLS, bu he mos obvious objecion o his approach is ha he price reurn variance of many commodiy fuures exhibi periods of high and low volailiy, or heeroscedasiciy. This violaes he assumpions of OLS and leads o inefficien esimaors. We find very srong evidence for commodiy price volailiy ime-variaion and clusering (see Appendix Figures A1 and A2).
9 A GARCH approach When asse reurn volailiies exhibi ime-variaion and clusering, a GARCH specificaion, which joinly models price reurns and volailiy, is ofen appropriae. 3 In his model, he condiional variance of asse price reurns h is assumed o be a funcion of lagged values of he unexpeced reurn ε -1 o ε -q and he condiional variance h -1 o h -s. The model can be wrien as: Δp J K = α + β Z + λ Δp + ε j = 1 k = 0 jk j k L l = 1 l l ε = ν h where ν ~ N( 0,1) (3) Q S 2 0 + γ1qε q + γ 2s q= 1 s = 1 h = γ h s There are many variaions on he GARCH heme bu some sudies have indicaed ha a simple GARCH (1,1) model wih one lag of he squared residual and one AR erm ofen ouperforms oher more complex specificaions (Hansen and Lund (2005)) and we use his specificaion. However, our analysis of he volailiy process for mos commodiies suggess ha he condiional variance is sensiive o unexpeced reurn shocks wih lags of greaer han one day (see Appendix Figure A2). Also, formal ess on he residuals of GARCH (1,1) esimaions sill show he presence of heeroscedasiciy for some commodiies. To accoun for hese feaures of he daa, we presen Bollerslev and Wooldridge (1992) sandard errors, which are consisen in he presence of any remaining heeroscedasiciy. We used likelihood raio ess o idenify he appropriae lag lenghs and found ha K =2 and L =2 in mos cases. 4 Conrolling for he U.S. dollar effec The model given by equaion (3) may be missing one imporan aspec of commodiy prices a high sensiiviy o oher financial variables. For example, macroeconomic news may exer an indirec influence hrough a commodiy s role as an effecive hedge agains lower ineres raes or a depreciaing U.S. dollar. In oher words, migh sensiiviy o announcemens merely reflec a relaionship beween he commodiy and oher financial asses, raher han he announcemens hemselves? To address his, we also include he U.S. dollar exchange rae in our analysis, as here is srong evidence ha commodiy prices have been sensiive o he U.S. dollar over a long 3 GARCH is an acronym for generalized auoregressive condiional heeroscedasiciy. 4 Deails on he GARCH and likelihood raio ess available from auhors by reques.
10 period (Roache (2008)). We assume ha all causaliy runs from he U.S. dollar measured using he Federal Reserve s rade-weighed index agains major rading parners o he commodiy price. 5 This assumpion is no unconroversial, as commodiy prices may influence exchange raes, a leas for economies for which commodiies accoun for a large share of expors or hrough he emerging soveriegn wealh fund (SWF) channel. However, recen evidence suggess ha exchange raes play he dominan role as forcing variable see Chen, Rogoff, and Rossi (2008) and Clemens and Fry (2008). We add he U.S. dollar index log change as an exogenous variable (Δe), including M lags, which would end o inroduce mulicollineariy assuming he exchange rae is affeced by economic announcemens. The mean equaion of he GARCH model (3) hen becomes: Δp J K j = 1 k = 0 jk j k L = α + β Z + λ Δp + θ Δe + ε l = 1 l l M m= 0 m m (4) Good news bad news and volailiy effecs Up o now, our analysis assumes ha commodiy price sensiiviy o announcemens is symmerical and consan over ime. However, he asymmerical naure of commodiy markes suggess ha i is reasonable o quesion hese assumpions. We explore wo possible facors ha migh condiion he response of commodiy prices o announcemens: firs, do recen volailiy paerns influence his sensiiviy?; second, does i maer wheher he news is good or bad? By condiioning he price response, we lose observaions and increase he number of coefficiens o be esimaed and wih a sample size of a lile over 10 years, his may leave insufficien informaion o capure hese effecs. Consequenly, following earlier sudies, we use a composie indicaor for hese condiioning models (see Galai and Ho (2003) and Erhmann and Frascher (2005)). This composie aggregaes he surprise elemen of he announcemens ino a single series, grealy simplifies he model, and increases he number of observaions. The following analysis uses only U.S. announcemens. The composie is he sum of he sandardized scores for each announcemen, excluding moneary policy shocks, and we do no impose any sign changes on hese scores. 6 7 We 5 Many commodiy prices are correlaed wih oher asse prices, bu our focus is on he U.S. dollar due o he significanly inverse relaionship beween he wo variables over a long period of ime. Indeed, commodiies are ofen viewed as a hedge agains U.S. dollar depreciaion versus oher major currencies wih large financial marke-relaed urnover, such as he yen, he Euro and he pound serling. Compared o he broader IMF nominal effecive exchange rae index, he narrower coverage of he Federal Reserve s exchange rae index provides cleaner exposure o hese currencies. 6 In oher words, he composie adds ogeher he sandardized surprises as calculaed by equaion (1) for each day. On a day wih no announcemen, he composie will have a value of zero (signifying no news). On a day (coninued)
11 compare our resuls agains a base model ha esimaes he regression of he log change in he gold price Δp on o a consan α, he conemporaneous value and wo lags of he composie indicaor Z, and wo auoregressive erms: Δp 2 = α + β Z + λ Δp + ε k = 0 k k 2 l = 1 l l (5) To assess wheher volailiy ofen used as a measure of invesor uncerainy affecs commodiy price sensiiviies, we condiion our analysis on he level of gold price volailiy over he preceding 30, 60, and 90 days. We classify an announcemen as arriving in a highvolailiy period if he daily sandard deviaion of he commodiy price for his period is above is sample average and vice versa for low volailiy. The mean equaion for he GARCH model hen becomes: Δp K k = 0 high k high k K = α + β Z + β Z + λ Δp + ε k = 0 low k low k L l = 1 l l (6) For he good news-bad news model, we define good news for he U.S. economy as an announcemen surprise ha should lead o an increase in he price of cyclically-sensiive asses; his would include higher-han-expeced GDP growh, indusrial producion, non-farm payrolls, consumer confidence, or inflaion. Of course, unexpecedly higher inflaion is no necessarily good news for he U.S. economy, bu we have classified his as good news, since i should, a priori, lead o an increase in commodiy prices. The mean equaion of he GARCH model we esimae can hen be wrien as: Δp K k = 0 good k good k K = α + β Z + β Z + λ Δp + ε k = 0 bad k bad k L l = 1 l l (7) III. RESULTS A. Scheduled Macroeconomic Announcemens A number of macroeconomic announcemens from he U.S. and he Euro area impac commodiy prices (see Table 3 and Appendix Table A2 for more deails). Some commodiy wih jus one announcemen, he composie s value will be he sandardized surprise of ha announcemen. On a day wih more han one announcemen, he surprise will be he summaion of he individual sandardized scores. 7 The resuls are robus o he inclusion of moneary policy shocks. We excluded hem o allow comparisons wih previous lieraure.
12 prices rise in response o announcemens revealing a higher-han-expeced level of economic aciviy. The resuls are no consisen across commodiies, wih energy producs ending o exhibi lile sensiiviy, consisen wih he findings of Kilian and Vega (2008). However, agriculural producs and base meals show some evidence of pro-cyclical price sensiiviy, which increases when we conrol for he ypically inverse relaionship of hese commodiies wih he U.S. dollar (see Table 4 and Appendix Table A3 for more deails). 8 In conras, gold prices end o be couner-cyclical, wih he price rising when aciviy indicaors are surprisingly weak. U.S. reail sales, non-farm payrolls, housing sars, and he ISM survey end o be he mos influenial indicaors. The German IFO survey is also a srong influence, paricularly for base meals, even when conrolling for he effec of he U.S. dollar. Table 3. Sensiiviy o Macroeconomic Announcemens January 1997 March 2009: Seleced Resuls (Coefficiens from esimaed single equaion GARCH regressions) 1/ 2/ 3/ Gold Crude Oil Whea Corn Copper Aluminium U.S. dollar Macroeconomic announcemens Advance reail sales -0.03-0.42-0.02 0.06 0.07 0.15 ** 0.05 Change in non-farm payrolls -0.18 * 0.12 0.23 * ** 0.08 0.05 0.13 *** Consumer confidence -0.15 ** 0.18-0.13-0.09-0.03 0.02 0.08 *** Consumer price index 0.01 - *** -0.26 ** -0.01 FOMC ineres rae decision -0.05-0.29 0.12 0.01 0.01 Advance GDP -0.13 - - -0.36 0.01 0.12 0.17 ** Housing sars -0.08 0.15-0.18-0.16 0.12 0.23 ** Indusrial producion -0.31 * 0.27 0.02-0.04-0.27 0.08 * ISM manufacuring survey -0.09-0.22 0.08-0.03 0.18 0.06 0.14 *** ECB ineres rae decision 0.15 ** -0.08 0.06 0.22 ** 0.02-0.03 German IFO survey 0.13 0.09 0.16 0.23 ** 0.21 * -0.11 Lagged by one day Advance reail sales -0.06-0.47-0.13 0.05-0.11-0.06 0.05 ** Change in non-farm payrolls 0.15 0.08 0.15-0.03 0.23 *** Exising home sales 0.06 0.34 * 0.08 0.17-0.15-0.02 FOMC ineres rae decision -0.26 *** 0.16-0.11-0.18-0.09-0.14 0.18 *** ISM manufacuring survey 0.01 0.06-0.04-0.06 0.25 ** 0.13-0.03 PPI ex-food and energy -0.19 ** -0.15-0.06 - -0.05-0.08 0.02 German IFO survey 0.22 *** -0.13 0.11 0.14 0.18 * 0.12-0.04 Source: Auhors esimaes. 1/ Coefficiens shown are hose ha were saisically significan a he 10 percen level or more. 2/ The coefficien on each announcemen is muliplied by 100 and represens he percen change in he price of he neares gold fuures conrac and U.S. dollar index for a 1-sandard deviaion surprise. 3/ Bollerslev-Woolridge sandard errors, which are robus o remaining heeroscedasiciy. Significance a he 99 percen, 95 percen, and 90 percen levels are denoed by ***, **, and * respecively. 8 The inverse relaionship of some commodiy prices wih he U.S. dollar will end o dampen heir measured pro-cyclical sensiiviy in he absence of a U.S. dollar conrol variable.
13 For gold, his apparen couner-cyclicaliy in he very shor-erm conradics he resuls from earlier research using sample periods ha srech beween 1970 and he early 1990s. Previous work had ended o find ha he gold price was pro-cyclical; i.e. i rose when U.S. inflaion increased or aciviy indicaors srenghened by more han he consensus had anicipaed. Our resuls do no imply ha he inflaion-hedging properies of gold have diminished, bu insead suggess wo feaures of gold: firs, in he shor-erm sensiiviy is higher o marke expecaions for real ineres raes; second, gold is seen as a safe-haven during bad imes. The shif o a more pro-acive U.S. moneary policy sance in he 1980s effecively subsiued real ineres volailiy for inflaion volailiy. This implies ha posiive inflaion surprises increase he probabiliy of couner-cyclical moneary ighening and higher real ineres raes, which end o appreciae he U.S. dollar and depress gold prices see Kaul (1987) for a similar argumen for equiy markes. Over longer ime horizons han 1-2 days, he evidence suggess ha real ineres raes may be less responsive o inflaion surprises han he marke had feared, which can ulimaely lead o posiive effecs on he gold price from inflaion shocks, as noed by Aié and Roache (2009). We also find ha Euro area indicaors ha poin o sronger aciviy or higher ineres raes end o increase he gold price and depreciae he U.S. dollar, providing furher evidence of gold s dollar-hedging characerisics. Indeed, he U.S. dollar s influence is unsurprisingly srong for gold, wih he effec of some individual announcemens losing significance when a conrol for his relaionship is included in he model. In conras, he pro-cyclical sensiiviies are heighened for oher commodiies once we add he U.S. dollar as a regressor (Appendix Table 3). Where i is significan, commodiy prices end o be inversely relaed o Federal Reserve ineres rae surprises, confirming he resuls of previous research. Even crude oil, which is quie insensiive o mos news evens, has exhibied his relaionship since 2001. However, we found very few occasions for which he marke has been surprised by he ineres rae announcemens following regularly scheduled FOMC meeings and hese resuls are influenced by a small number of daapoins. There are more daapoins for ECB ineres rae surprises and, when conrolling for he U.S. dollar, here is evidence ha precious and base meals prices are inversely relaed o ineres rae shocks. 9 We also included U.K. ineres rae decisions, bu he resuls were srongly influenced by he very large surprise rae cu in November 2008. Excluding his oulier, U.K. ineres rae decisions were no significan. The conclusions are qualiaively similar when we break he sample ino wo sub-periods based on he rend of he broad CRB commodiy price index. During he firs subperiod from 1997 o November 2001, his index was eiher rending lower or rading wihin a range, while 9 I is imporan o conrol for he U.S. dollar in his case as he U.S. dollar will end o appreciae (depreciae) when he ECB unexpecedly cus (hikes) is benchmark policy ineres rae.
14 he second period, from December 2001 o March 2009, is characerized by a sharp rise and subsequen decline. 10 Our aim in his analysis is o assess wheher shor-erm price dynamics have changed due o he increasing commodiy marke paricipaion by financial invesors. The number of indicaors affecing prices and he degrees of pro-cyclical sensiiviy among non-gold commodiies have ended o rise since 2001, bu he overall resuls oulined above remain inac (see Appendix Tables A3 and A4). Table 4. Sensiiviy o Macroeconomic Announcemens January 1997 May 2009: Seleced Resuls (Including U.S. dollar conrol variables) 1/ 2/ 3/ Gold Crude Oil Whea Corn Copper Aluminium U.S. dollar Macroeconomic announcemens Advance reail sales -0.38-0.01 0.07 0.17 ** Change in non-farm payrolls -0.05 0.24 0.29 * 0.25 ** 0.17 0.12 Consumer confidence -0.07 0.24-0.09-0.06 0.01 0.07 Consumer price index 0.08 0.01 0.11 0.12-0.29 *** -0.23 * FOMC ineres rae decision 0.03-0.28 0.13 0.02 Advance GDP -0.01-0.22-0.05-0.32 0.06 0.16 Housing sars -0.05 0.17-0.18-0.16 0.12 0.23 ** Indusrial producion -0.19 0.33 0.05-0.05 0.27 ISM manufacuring survey 0.06-0.15 0.16 0.03 0.29 * 0.13 ECB ineres rae decision 0.13 *** - 0.05 ** 0.01 German IFO survey 0.01 0.16 0.17 * 0.18 * Lagged by one day Advance reail sales -0.01-0.43-0.08-0.08-0.02 Change in non-farm payrolls 0.14 0.11 0.17-0.02 0.25 *** Exising home sales 0.04 0.37 ** 0.07 0.14-0.15-0.09 FOMC ineres rae decision -0.03 0.26 - -0.18-0.07 ISM manufacuring survey -0.02 0.04-0.06-0.07 0.25 ** 0.13 PPI ex-food and energy -0.16 * -0.13-0.08 - -0.04-0.08 German IFO survey 0.17 *** -0.14 0.09 0.13 0.15 0.09 Source: Auhors esimaes. 1/ Coefficiens shown are hose ha were saisically significan a he 10 percen level or more in he benchmark model shown in Table 3. 2/ The coefficien on each announcemen is muliplied by 100 and represens he percen change in he price of he neares gold fuures conrac and U.S. dollar index for a 1-sandard deviaion surprise. 3/ Bollerslev-Woolridge sandard errors, which are robus o remaining heeroscedasiciy. Significance a he 99 percen, 95 percen, and 90 percen levels are denoed by ***, **, and * respecively. 10 Chow ess based on breakpoins around November 2001 indicae ha i was no possible o rejec he null hypohesis of model sabiliy over he enire 1997-2009 sample a he 5 percen level for almos all commodiies.
15 Table 5. Sensiiviy o Macroeconomic Announcemens December 2001 May 2009: Seleced Resuls (Including U.S. dollar conrol variables) 1/ 2/ 3/ Gold Crude Oil Whea Corn Copper Aluminium U.S. dollar Macroeconomic announcemens Advance reail sales -0.38-0.01 0.07 0.17 ** Change in non-farm payrolls -0.05 0.24 0.29 * 0.25 ** 0.17 0.12 Consumer confidence -0.07 0.24-0.09-0.06 0.01 0.07 Consumer price index 0.08 0.01 0.11 0.12-0.29 *** -0.23 * FOMC ineres rae decision 0.03-0.28 0.13 0.02 Advance GDP -0.01-0.22-0.05-0.32 0.06 0.16 Housing sars -0.05 0.17-0.18-0.16 0.12 0.23 ** Indusrial producion -0.19 0.33 0.05-0.05 0.27 ISM manufacuring survey 0.06-0.15 0.16 0.03 0.29 * 0.13 ECB ineres rae decision 0.13 *** - 0.05 ** 0.01 German IFO survey 0.01 0.16 0.17 * 0.18 * Lagged by one day Advance reail sales -0.01-0.43-0.08-0.08-0.02 Change in non-farm payrolls 0.14 0.11 0.17-0.02 0.25 *** Exising home sales 0.04 0.37 ** 0.07 0.14-0.15-0.09 FOMC ineres rae decision -0.03 0.26 - -0.18-0.07 ISM manufacuring survey -0.02 0.04-0.06-0.07 0.25 ** 0.13 PPI ex-food and energy -0.16 * -0.13-0.08 - -0.04-0.08 German IFO survey 0.17 *** -0.14 0.09 0.13 0.15 0.09 Source: Auhors esimaes. 1/ Coefficiens shown are hose ha were saisically significan a he 10 percen level or more in he benchmark model shown in Table 3. 2/ The coefficien on each announcemen is muliplied by 100 and represens he percen change in he price of he neares gold fuures conrac and U.S. dollar index for a 1-sandard deviaion surprise. 3/ Bollerslev-Woolridge sandard errors, which are robus o remaining heeroscedasiciy. Significance a he 99 percen, 95 percen, and 90 percen levels are denoed by ***, **, and * respecively. Gold price more sensiive o bad news B. Good News, Bad News, and Volailiy Resuls indicae ha here are few commodiies for which he good-bad news disincion makes any difference, wih one excepion being gold bad news affecs he gold price much more han good news (Table 6). The coefficien on he bad news aggregae is saisically significan and much higher han ha on good news, a resul ha is mainained even when we conrol for he U.S. dollar (Table A7). We also show he effec on he U.S. dollar which is, perhaps unsurprisingly, symmeric for boh ypes of news. This is consisen wih he view ha gold is a safe haven and financial asses in his case gold fuures experience greaer volailiy during periods in which economic or financial condiions deeriorae. There is also he poenial for significan non-lineariies in gold price sensiiviies, alhough we do no address ha possibiliy in his paper.
16 Gold price more sensiive when uncerainy is high For he U.S. dollar we confirm he sandard resul ha sensiiviy is higher following a period of elevaed volailiy. For almos all commodiies, excep gold, however, he ype of news does no have a significan impac. The impac of news on gold is sronger following periods of volailiy, bu only when we conrol for he U.S. dollar (Table A7). Table 6. Sensiiviy o Macroeconomic Announcemens Condiioned on High/Low Volailiy and Good/Bad News January 1997 March 2009: Seleced Resuls 1/ 2/ Gold Crude oil Whea Corn Soybeans Copper Aluminium US dollar Aggregae news -0.08 *** 0.01 0.01-0.02 0.02 0.05 0.05 *** Aggregae news -1-0.03-0.04-0.02-0.01-0.03 0.01 Aggregae news -2 0.02-0.05 0.06-0.02-0.01 0.07 * 0.05 0.01 Good/ bad news wih no US$ conrol Aggregae news regressor Good news -0.02-0.05 0.09 * * 0.09 0.12 *** 0.05 *** Good news -1-0.03-0.09-0.04-0.08 * 0.02 0.01-0.07 0.01 Bad news -0.17 *** 0.08-0.08 - *** -0.13 ** -0.05-0.04 0.05 *** Bad news -1-0.03 0.01 0.02 0.11-0.03-0.06 0.08 0.01 High/ low volailiy wih no US$ conrol Regressors Hi vol - news -0.07-0.01-0.16-0.19-0.16-0.04 0.04 0.12 *** Hi vol - news -1-0.07 - -0.07-0.16-0.07 0.01-0.06-0.03 Lo vol - news -0.09 *** 0.02 0.06 0.01 0.02 0.03 0.05 0.03 *** Lo vol - news -1-0.02 0.04 0.01-0.03 0.01 0.01 Source: Auhors esimaes. 1/ The coefficien on each announcemen is muliplied by 100 and represens he percen change in he price of he neares gold fuures conrac and U.S. dollar index for a 1-sandard deviaion surprise. 2/ Bollerslev-Woolridge sandard errors, which are robus o remaining heeroscedasiciy. Significance a he 99 percen, 95 percen, and 90 percen levels are denoed by ***, **, and * respecively. IV. CONCLUSION Our resuls sugges ha commodiies are no jus financial asses and gold is no jus anoher commodiy. Some commodiy prices are influenced by he surprise elemen in macroeconomic news, wih evidence of a pro-cyclical bias, paricularly when we conrol for he effec of he U.S. dollar. Commodiies end o be less sensiive han financial asses for example, crude oil, he mos acively raded commodiy fuures conrac, shows no significan responsiveness o almos all announcemens. However, as commodiy markes have become financialized in recen years, so heir sensiiviy appears o have risen somewha o boh macroeconomic news and surprise ineres rae changes.
17 The gold price is sensiive o a number of scheduled U.S. and Euro area macroeconomic announcemens including reail sales, non-farm payrolls, and inflaion. Gold s high sensiiviy o real ineres raes and is unique role as a safe-haven and sore of value ypically leads o a couner-cyclical reacion o surprise news, in conras o heir commodiies. I also shows a paricularly high sensiiviy o negaive surprises ha migh lead financial invesors o become more risk averse. These resuls have a number of implicaions. To reduce he uncerainy of he reurn on gold ransacions, raders may wish o ime heir orders flow so as o avoid he release of informaion ha has been shown o affec prices. For longer-erm marke paricipans, hese resuls provide confirmaion of he pro-cyclical bias of many commodiies and gold s role as a safe-haven during periods of economic uncerainy. Looking forward, one key issue will be he exen o which increasing financializaion heighens he sensiiviy of commodiies o macroeconomic developmens.
18 REFERENCES Andersen, Torben G., Tim Bollerslev, Francis X. Diebold, and Clara Vega, 2003, Micro Effecs of Macro Announcemens: Real-Time Price Discovery in Foreign Exchange, American Economic Review, Vol. 93, pp. 38-62. Anoniou, Anonios, and Andrew J. Foser, 1992, The Effecs of Fuures Trading on Spo Price Volailiy: Evidence for Bren Crude Oil Using GARCH, Journal of Business Finance & Accouning, Vol. 19 No. 4, pp. 473-484. Aié, Alexander P., and Shaun K. Roache, 2009, Inflaion Hedging for Long-Term Invesors, IMF Working Paper, No. 09/90. Balduzzi, Pierluigi, Edwin J. Elon, and T. Clifon Green, 2001, Economic News and Bond Prices: Evidence from he U.S. Treasury Marke, The Journal of Financial and Quaniaive Analysis, Vol. 36, No. 4, pp. 523-543. Barnhar, Sco W., 1989, The Effecs of Macroeconomic Announcemens on Commodiy Prices, American Journal of Agriculural Economics, Vol. 71, No. 2, pp. 389-403. Bollerslev, Tim and Jeffrey M. Wooldridge, 1992, Quasi-Maximum Likelihood Esimaion and Inference in Dynamic Models wih Time Varying Covariances, Economeric Reviews, 11, pp. 143-172. Cai, Jun, Yan-Leung Cheung, Michael C. S. Wong, 2001, Wha moves he gold marke? Journal of Fuures Markes, Volume 21 Issue 3, pp. 257-278. Chen, Yu-Chin, Kenneh Rogoff, and Barbara Rossi, 2008, Can Exchange Raes Forecas Commodiy Prices?, Economic Research Iniiaives a Duke (ERID) Working Paper, No. 1. Chrisie David, Rohan, Mukesh Chaudhry, and Timohy W. Koch, 2000, Do Macroeconomics News Releases Affec Gold and Silver Prices?, Journal of Economics and Business, 52, pp. 405 421. Clemens, Kenneh W., and Renee Fry, 2008, Commodiy Currencies and Currency Commodiies, Resources Policy, Volume 33, Issue 2, pp. 55-73. Cornell, Bradford, and Kenneh R. French, 1986, Commodiy Own Raes, Real Ineres Raes, and Money Supply Announcemens, Journal of Moneary Economics, 18, pp. 3-20. Ehrmann, M., and M. Frazscher, 2005, Exchange Raes and Fundamenals: New Evidence from Real-Time Daa, Journal of Inernaional Money and Finance, 24, pp. 317-341. Engle, Rober F. and Kenneh F. Kroner, 1995, Mulivariae Simulaneous Generalized ARCH, Economeric Theory, Vol. 11, No.1, pp. 122-150.
19 Fleming, M. J., and E. M. Remelona, 1999, Price Formaion and Liquidiy in he U.S. Treasury Marke: The Response o Public Informaion, Journal of Finance, 54, pp. 1901-1915. Frankel, Jeffrey A., 2008, The Effec of Moneary Policy on Real Commodiy Prices, in Asse Prices and Moneary Policy, John Campbell, ed., U. of Chicago Press, pp. 291-327. Frankel, Jeffrey A., and Gikas A. Hardouvelis, 1985, Commodiy Prices, Money Surprises and Fed Credibiliy, Journal of Money, Credi and Banking, Vol. 17, No. 4, Par 1, pp. 425-438. Galai, Gabriele, and Corrine Ho, 2003, Macroeconomic News and he Euro/Dollar Exchange Rae Economic Noes, vol. 32, no. 3, pp. 371 398. Ghura, Dhaneshwar, 1990, How Commodiy Prices Respond o Macroeconomic News, World Bank PRE Working Paper, No. 354. Hansen, Peer, and Asger Lund, 2005, A Forecas Comparison of Volailiy Models: Does Anyhing Bea a GARCH (1,1)?, Journal of Applied Economerics, 20, pp. 873 889. Hess, Dieer, He Huang, and Alexandra Niessen, 2008, How Do Commodiy Fuures Respond o Macroeconomic News?, Journal of Financial Markes and Porfolio Managemen, Volume 22, Number 2. Kaul, Gauam, 1987, Sock Reurns and Inflaion The Role of he Moneary Secor, Journal of Financial Economics, Vol. 18, No. 2, pp. 253 276. Kilian, Luz, and Clara Vega, 2008, Do Energy Prices Respond o U.S. Macroeconomic News? A Tes of he Hypohesis od Predeermined Energy Prices, Federal Reserve Inernaional Discussion Paper, No. 957. Payne, R., 2003, Informed rade in Spo Foreign Exchange Markes: An Empirical Invesigaion, Journal of Inernaional Economics, 61, pp. 307-328. Roache, Shaun, 2008, Commodiies and he Marke Price of Risk, IMF Working Paper, No. 08/221. Rossi, Marco, 1998, Economic Announcemens and he Timing of Public Deb Aucions, IMF Working Paper, No. 98/44. Yang, Jian, R. Brian Balyea, and David J. Leaham, 2005, Fuures Trading Aciviy and Commodiy Cash Price Volailiy, Journal of Business Finance & Accouning, 32(1), pp. 297-323.
20 APPENDIX Table A1. Commodiy Fuures Conracs Specificaion Conrac Exchange 1/ Specificaion summary 2/ Closing price ime Gold COMEX 100 roy ounces 17:15 EST Silver COMEX 5,000 roy ounces 17:15 EST Plainum NYMEX 50 roy ounces 17:15 EST Palladium NYMEX 100 roy ounces 17:15 EST Oil NYMEX Ligh, swee crude, 1,000 barrels 17:15 EST Heaing oil NYMEX 42,000 barrels 17:15 EST Naural gas NYMEX 10,000 million Briish hermal unis 17:15 EST Whea CBOT 5,000 bushels 13:15 CST Corn CBOT 5,000 bushels 13:15 CST Soybeans CBOT 5,000 bushels 13:15 CST Copper COMEX High grade, 25,000 pounds 17:15 EST Aluminium COMEX 44,000 pounds 17:15 EST Source: COMEX division of NYMEX, NYMEX, and CBOT. 1/ COMEX is a division of NYMEX, he New York Mercanile Exchange. CBOT is an abbreviaion of he Chicago Board of Trade. 2/ Refer o individual exchanges for full specificaions.
21 Table A2. U.S. and Euro area Macroeconomic Announcemens: Summary Saisics, January 1997 April 20091/ (Monhly percen change, unless oherwise specified) Sandard Average Average deviaion Macroeconomic announcemen acual surprise surprise Advance reail sales 0.2 0.0 0.6 Change in non-farm payrolls (housands) 43.6-24.0 77.5 Consumer confidence (index) 89.8-0.3 5.0 Consumer price index 0.2 0.0 0.2 Employmen cos index (quarerly percen change) 0.7 0.0 0.2 Exising home sales -1.1 0.1 3.3 FOMC ineres rae decision (absolue basis poin change) 18-1 6 Advance GDP (annualized quarerly percen change) 2.5 0.0 0.0 Housing sars (housands) 1,648 9.4 101 Indusrial producion 0.1 0.0 0.0 ISM manufacuring survey 52.9 0.1 2.1 PPI ex-food and energy (MoM) 0.2 0.0 0.5 ECB ineres rae decision (absolue basis poin change) 30 3 8 German IFO survey 96.7 0.1 1.2 U.K. ineres rae decision (absolue basis poin change) 10 4 9 Source: Bloomberg; Auhors esimaes 1/ Acuals denoe he daa as of he release dae and do no reflec subsequen revisions.
22 Table A3. Commodiy Price Sensiiviy o Economic Announcemens, January 1997 May 2009 1/ Crude Heaing Naural Gold Silver Plainum Palladium Oil Oil Gas Whea Corn Soybeans Copper Aluminium Macroeconomic announcemens Advance reail sales -0.03 0.04 0.01 0.02-0.42-0.43 - -0.02 0.06-0.04 0.07 0.15 ** Change in non-farm payrolls -0.18 * -0.06 0.08-0.03 0.12 0.17 0.06 0.23 * ** 0.06 0.08 0.05 Consumer confidence -0.15 ** 0.01-0.17 - ** 0.18 0.19 0.80 *** -0.13-0.09-0.03 0.02 Consumer price index 0.03 0.11 0.19 0.01-0.07-0.17 0.15 - *** -0.26 ** Employmen cos index 0.05 0.16 0.28 0.48 0.14 0.19-0.06 0.18 0.46 ** -0.24-0.11 Exising home sales -0.05-0.08-0.11 0.01-0.12-0.29 * -0.45 * 0.08-0.17 0.02 0.15-0.05 FOMC ineres rae decision -0.05-0.07-0.41 ** -0.06-0.29-0.21-0.12 0.01 Advance GDP -0.13-0.04 0.06 0.35 - -0.16 0.04 - -0.36-0.36 ** 0.01 0.12 Housing sars -0.08-0.03 0.06 0.11 0.15 0.11-0.41 ** -0.18-0.16-0.12 0.23 ** Indusrial producion -0.31 * -0.26-0.12 0.34 0.27 0.22-0.06 0.02-0.04-0.03-0.27 ISM manufacuring survey -0.09-0.09-0.11 0.06-0.22-0.19-0.32 0.08-0.03-0.05 0.18 0.06 PPI ex-food and energy -0.02 0.12-0.03 0.07-0.05-0.52 * -0.04 - -0.06-0.04 0.08 ECB ineres rae decision 0.15 ** 0.06-0.49 0.27-0.08-0.33-0.06 0.22 ** -0.08 *** 0.02 German IFO survey 0.13 0.11 0.34 *** 0.06 0.09 0.97 *** 0.16 0.24 0.23 ** 0.21 * UK ineres rae decision -0.06-0.17-0.08-0.01 0.04 0.14-0.13 0.05 0.05 * 0.08 Lagged by one day Change in non-farm payrolls -0.08-0.14-0.21 0.15 0.25-0.01 0.08 0.15 0.21 * -0.03 0.23 *** Consumer confidence 0.01 0.01 1.17 0.32 - -0.24 0.25-0.05-0.02-0.09-0.07-0.06 Consumer price index -0.13-0.14 0.06 0.02-0.05 0.17 0.03-0.18-0.12-0.18 * -0.13-0.06 Employmen cos index 0.03-0.15-0.16 0.64 * 0.04-0.16 0.66-0.15-0.05 - * -0.07 Exising home sales 0.06 0.11-0.58 *** -0.29 * 0.34 * 0.41 ** -0.26 0.08 0.17 0.35-0.15 - FOMC ineres rae decision -0.26 *** -0.27 *** -0.67 ** -0.18 0.16 0.09 0.72 *** -0.11-0.18-0.15-0.09-0.14 Advance GDP 0.01 0.02-0.14 0.32 0.16 0.23 0.84-0.01 0.15 * 0.18 *** 0.06 0.11 ISM manufacuring survey 0.01 0.18-0.01 0.15 0.06 0.22 0.66 *** -0.04-0.06-0.07 0.25 ** 0.13 PPI ex-food and energy -0.19 ** -0.05-0.18 * -0.28 * -0.15 0.01-0.68-0.06 - -0.13-0.05-0.08 ECB ineres rae decision -0.08-0.02 0.02 0.11 0.09 0.23 * 0.02 0.22 ** -0.01-0.02 German IFO survey 0.22 *** 0.23 *** 0.39 *** 0.29 ** -0.13-0.25 0.14 0.11 0.14 0.09 0.18 * 0.12 UK ineres rae decision 0.07 0.36 *** 0.19 ** 0.42 *** -0.07 0.01 0.70 *** 0.36 *** 0.21 * 0.19 * - -0.13 22 Lagged price -1-0.02 0.02 0.11 *** -0.01-0.02-0.03 * 0.01 0.04 ** -0.02-0.07 *** -0.08 *** Lagged price -2-0.02 0.03-0.06 *** -0.04 ** -0.05 *** -0.03-0.02 0.03 * -0.01-0.02 Source: Auhors' esimaes. 1/ The coefficien on each announcemen is muliplied by 100 and represens he percen change in he price of he neares gold fuures conrac and U.S. dollar index for a 1-sandard deviaion surprise. Bollerslev-Woolridge sandard errors, which are robus o remaining heeroscedasiciy. Significance a he 99 percen, 95 percen, and 90 percen levels are denoed by ***, **, and * respecively. Only saisically significan coefficiens are shown a lag 1.
23 Table A4. Commodiy Price Sensiiviy o Economic Announcemens (wih U.S. dollar conrol) January 1997 May 2001 Crude Heaing Naural Gold Silver Plainum Palladium Oil Oil Gas Whea Corn Soybeans Copper Aluminium Macroeconomic announcemens Advance reail sales 0.06 0.06 0.15-0.38-0.36-0.12-0.01 0.07-0.01 0.17 ** Change in non-farm payrolls -0.05 0.07-0.01 0.13 0.24 0.28 0.16 0.29 * 0.25 ** 0.17 0.12 Consumer confidence -0.07 0.12 0.17-0.33 * 0.24 0.26 0.84 *** -0.09-0.06 0.02 0.01 0.07 Consumer price index 0.08 0.05 0.09 0.15 0.01-0.07-0.18 0.11 0.12 0.19-0.29 *** -0.23 * Employmen cos index 0.14 0.16 0.43 0.15 0.06 0.19-0.06 0.14 0.44 ** -0.26-0.17 Exising home sales -0.04-0.05-0.15 0.03-0.11-0.31 * -0.47 * 0.07-0.17 0.01 0.15-0.06 FOMC ineres rae decision 0.03-0.06-0.43 ** -0.02-0.28 - -0.39 0.13 0.02 Advance GDP -0.01 0.18 0.09 0.55 * -0.22-0.07 0.14-0.05-0.32-0.32 ** 0.06 0.16 Housing sars -0.05-0.07 0.05 0.17 0.13-0.42 ** -0.18-0.16-0.19 0.12 0.23 ** Indusrial producion -0.19-0.18-0.19 * 0.33 0.28-0.02 0.05-0.05 0.27 ISM manufacuring survey 0.06 0.03 0.22-0.15-0.11-0.26 0.16 0.03 0.02 0.29 * 0.13 PPI ex-food and energy -0.03 0.08-0.11-0.05 0.06-0.05-0.50 * -0.06-0.13-0.08-0.07 0.04 ECB ineres rae decision 0.13 *** 0.02-0.41 - -0.34-0.05 ** -0.09 *** 0.01 German IFO survey 0.16-0.02 0.01 0.01 0.88 *** 0.16 0.21 0.17 * 0.18 * UK ineres rae decision 0.06-0.09-0.04 0.03 0.06 0.16 0.21-0.08 0.08 * 0.04 0.07 Lagged by one day Change in non-farm payrolls -0.04-0.14-0.19 0.14 0.25-0.01 0.11 0.17 0.23 * -0.02 0.25 *** Employmen cos index -0.11-0.19 0.66 * 0.06-0.15 0.67-0.13-0.03-0.15 * 0.21-0.09 Exising home sales 0.04 0.11-0.59 *** -0.25 * 0.37 ** 0.41 ** -0.23 0.07 0.14 0.34-0.15-0.09 FOMC ineres rae decision -0.03-0.05-0.60 * 0.03 0.26 0.21 * 0.83 *** - -0.18-0.15-0.07 Advance GDP 0.02 0.07-0.11 0.33 0.15 0.21 0.86 0.23 * 0.26 *** 0.07 Housing sars -0.12 ** -0.03-0.04-0.19-0.01-0.07 0.09 0.19 - -0.19-0.16 ISM manufacuring survey -0.02 0.14-0.02 0.08 0.04 0.63 *** -0.06-0.07-0.07 0.25 ** 0.13 PPI ex-food and energy -0.16 * -0.01-0.14-0.24 * -0.13 0.02-0.64-0.08 - -0.13-0.04-0.08 ECB ineres rae decision -0.13 ** -0.08-0.03 0.11 0.03 0.17 0.14 0.23 * 0.02 0.21 ** -0.04-0.05 German IFO survey 0.17 *** 0.22 ** 0.29 ** 0.31 ** -0.14-0.26 0.15 0.09 0.13 0.07 0.15 0.09 UK ineres rae decision 0.08 0.35 *** 0.18 * 0.39 *** -0.08 0.72 *** 0.33 *** 0.18 * 0.17 * -0.08-0.12 23 Lagged price -1-0.04 * -0.03-0.01 0.12 *** -0.02-0.03-0.03 * 0.01 0.03 * -0.03-0.08 * - Lagged price -2-0.02 0.03-0.06 *** -0.02-0.05 *** -0.03 * -0.02 0.02-0.03 U.S. dollar index change -1.04 *** -1.13 *** -0.74 *** -1.02 *** -0.63 *** -0.67 *** -0.52 *** -0.53 *** -0.42 *** -0.45 *** -0.57 *** -0.41 *** U.S. dollar index change -1 - ** -0.04-0.18 ** 0.18 ** -0.01-0.07 0.11-0.03 - -0.14 ** -0.07-0.25 *** U.S. dollar index change -2-0.04 0.04-0.03 0.18 ** 0.02-0.04 0.01-0.09-0.05-0.08-0.01 0.01 Source: Auhors' esimaes.
24 Table A5. Commodiy Price Sensiiviy o Announcemens, December 2001 May 2009 Crude Heaing Naural Gold Silver Plainum Palladium Oil Oil Gas Whea Corn Soybeans Copper Aluminium Macroeconomic announcemens Advance reail sales -0.18 - -0.15-0.12-0.31-0.25-0.26-0.21-0.03-0.34 *** 0.15 0.08 Change in non-farm payrolls -0.32 ** -0.41 ** 0.06-0.11 0.16 0.23 0.29 0.33 * 0.34 * 0.08-0.11 0.09 Consumer confidence -0.13-0.14 - * -0.37 ** 0.22 0.32 * 0.61 * -0.04-0.03 0.05 0.24 0.06 Consumer price index 0.34 * -0.01 0.19-0.09-0.11-0.26 0.14 0.13-0.07-0.17 Employmen cos index 0.01 0.46 0.51 * 0.83 * 0.24 0.47 0.50-0.07 0.22 0.44 * -0.62 0.14 Exising home sales 0.01-0.13 0.07-0.23-0.44 ** -0.53-0.04-0.12 0.16 0.01 FOMC ineres rae decision 0.02 0.02-0.02 0.02-0.22 *** 0.07 0.08-0.11 *** -0.15 *** Advance GDP 0.27 0.16 0.51 * -0.21 0.14-0.36-0.57-0.81 ** -0.02 0.05 Housing sars -0.06-0.19-0.03 0.22 0.02-0.45 ** -0.15-0.16-0.23 0.15 0.25 ** Indusrial producion -0.33 * -0.03 0.29 0.25 0.27-0.13 0.13-0.12-0.05-0.06 0.21 ISM manufacuring survey -0.21 * -0.28 * 0.01-0.03-0.17-0.11-0.11 0.39 0.27 0.23 0.27 0.08 PPI ex-food and energy 0.09 0.25 ** 0.04 0.21 0.14-0.49 * -0.12 * - -0.05 *** 0.04 0.08 ECB ineres rae decision 0.01 0.01-0.36-0.33 0.18-0.11-0.29-0.31 0.07 ** -0.50 ** -0.55 *** -0.19 ** German IFO survey 0.12 0.03 0.29 ** 0.05 0.50 ** * 1.00 *** 0.25 0.28 0.25 0.28 * UK ineres rae decision 0.14 0.32-0.04 0.26-0.21-0.04 0.32 0.01 0.18 ** 0.02 ** 0.19 * Lagged by one day Change in non-farm payrolls -0.08-0.03-0.29 ** -0.56 *** 0.02 0.09 0.09 0.19 0.38 ** 0.32 ** 0.16 0.27 ** Exising home sales 0.09 0.24-0.38 *** -0.16 0.15 0.35-0.27 0.53 0.43 0.62 *** -0.33 *** - ** FOMC ineres rae decision -0.23 *** - *** - * -0.03 0.42 0.18 0.68 ** -0.16-0.29 * -0.08 0.13-0.18 Advance GDP - -0.11-0.22 0.19 0.37 0.65 0.71 0.06 0.17 * 0.05 0.08 ISM manufacuring survey 0.02 0.26-0.02 0.27 0.09 0.34 0.79 *** -0.07-0.03 * 0.15 PPI ex-food and energy -0.21 * -0.04-0.07-0.32 ** -0.13 0.04-0.90-0.06-0.08-0.03 0.01-0.11 ECB ineres rae decision -0.32 ** -0.28-0.47 ** -0.11-0.15-0.22 0.37 0.01-0.04 0.27 *** 0.19 0.33 * German IFO survey 0.21 ** 0.35 *** 0.28 ** *** -0.25-0.17 0.28-0.39 *** 0.22 0.26 * 0.18 UK ineres rae decision -0.01 0.29 * 0.31 ** -0.22-0.19 0.75 * 0.22 0.12-0.01 0.09 Lagged price -1-0.03 0.01 0.01 0.11 *** -0.04 * -0.05 ** -0.01-0.01 0.05 * -0.01-0.06 *** -0.08 *** Lagged price -2-0.01 0.03-0.03-0.02-0.02 0.01 0.01 0.01 0.01-0.01-0.04 Source: Auhors' esimaes. 24