The Macroeconomic Determinants of Volatility in
Precious Metals Markets
Jonathan A. Batten, Cetin Ciner and Brian M. Lucey
Jonathan A. Batten
Graduate School of Management, Macquarie University
CBD Campus Level 6, 51-57 Pitt St
Sydney, NSW 2000, Australia
Tel: ++61-2-8274-8344, Fax: ++61-2-8274-8370
Email: [email protected]
Department of Finance
Hong Kong University of Science & Technology
Clear Water Bay, Kowloon, Hong Kong
Tel: ++852-2358 8202 Fax: ++852-2358 1749
Email: [email protected]
Cetin Ciner
Cameron School of Business
University of North Carolina- Wilmington
Wilmington, NC, USA
Tel: ++1- 910-962 7497 Fax: ++1- 910-962-3922
E-mail: [email protected]
Brian M Lucey
Trinity College, Dublin - School of Business and Institute for International Integration
Studies,
The Sutherland Centre, Level 6, Arts Building, Dublin 2, Ireland
Tel: +353 1 608 1552 Fax: +353 1 679 9503
Email: [email protected]
Date: 1st June 2008
JEL: C32, G10, Q40
Keywords: Commodity prices; Gold; Macroeconomic factors; Silver; Volatility
Abstract
We investigate key macroeconomic factors that impact the price returns of precious
metals markets. The markets investigated were gold, silver, platinum and palladium;
whereas the macroeconomic factors accommodated business cycle, monetary
environment and financial market sentiment factors. The key findings present limited
evidence that the same macroeconomic factors jointly influence the volatility processes
of the precious metal price series, although there is some evidence of volatility feedback
between the precious metals. This finding lends weight to views that individual
commodities are too distinct to be considered a single asset class or represented by a
single index; a finding of considerable importance for portfolio managers and investors.