Do macroeconomic news releases affect gold and silver prices?

This 2000 paper analyses responses of Gold and Silver futures prices to news in a low inflation environment relative to that of 2 interest rate instruments, Federal Bonds and Municipal Bonds. The abstract states that:

Using intraday data, we document the responses of gold and silver future prices to monthly macroeconomic news releases. Both metals respond strongly to the release of Capacity Utilization. Gold also responds strongly to the release of the CPI. We also find that the release of the Unemployment Rate affects both gold and silver, whereas the Gross Domestic Product and PPI have significant effects on gold. Weak responses by gold to the release of the Federal Deficit and silver to the release of the CPI, Hourly Wages, Business Inventories, and Construction spending are also noted.

The authors test if news releases significantly affect the variance of each of the assets under consideration using a BFL test. They find that while the variance in the price of bonds spiked after announcements, particularly those that occurred at 7.30, the affect on precious metals was different. News had a significant effect on gold’s variance but only 1% as large as that for T-Bond futures. Silvers variance is always very large relative to the other assets and was actually smaller with announcements.

They also look at the effect of news announcement that are different from forecast, the surprise in the announcement, through a regression model the results of which are shown below in a table, with a Y if variable is significant at 1% or 5% and an N if not. Gold appears to be much more effected by the macroeconomic developments than silver.

	Gold	Silver	T-bond	M-Bond
CPI	Y	N	Y	N
Unemployment	Y	Y	Y	Y
Hourly wages	N	N	Y	N
Non Farm Payroll	N	N	Y	Y
GDP	Y	N	Y	N
House starts	N	N	Y	N
PPI	Y	N	Y	Y
Retail Sales	N	N	Y	Y
Durable Goods	N	N	N	N
Industrial Production	N	N	Y	Y
Capacity Utilisation	Y	Y	Y	Y
Construction Spending	N	N	Y	Y
New Home Sales	N	N	Y	N
Personal Spending	N	N	Y	N
Business Inventories	N	N	N	N

Method: Tests for differences in variance using a test developed by Brown and Forsythe (1974) subsequently modified by Levene (1960) [BFL Test]. Regressions are also run to test if surprise announcements have an effect.

Data: Intraday data at 15 minute intervals from 3/1/1992 – 29/12/1995 of futures prices for US treasury bonds, municipal bonds, gold and silver from COMEX.  23monthly macroeconomic news releases by Federal Agencies and the National Association of Purchasing Managers

Full Citation: Christie-David, R., M. Chaudhry, et al. (2000). “Do Macroeconomics News Releases Affect Gold and Silver Prices?” Journal of Economics and Business 52(5): 405-21.