The Macroeconomic Determinants of Volatility in Precious Metals Markets

considered were variables that are well known as usefully accounting for the effects of
the business cycle, monetary environment and financial market sentiment on asset
returns. The study extends existing work in this area, including papers in commodity
markets by Strongin and Petsch (1996) and Gorton and Rouwenhorst (2006) and those in
stock markets, such as Pesaran and Timmermann (1995), Vrugt et al. (2004) and Chan
and Young (2006). The key findings present limited evidence of the same
macroeconomic factors jointly influencing the volatility processes of the commodity
price series examined, although there is limited evidence of volatility feedback between
the precious metals. This finding lends weight to Erb and Harvey (2006) that individual
commodities are too distinct to be considered as a single asset class or represented by a
single index.

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