Examining the impact of macroeconomic announcements on gold futures in a VAR-GARCH framework

Abstract

This article considers the impact of major scheduled US macroeconomic announcements on the COMEX gold futures market in a high-frequency setting. A VAR-GARCH framework identifies the significant relationship between the release of macroeconomic news and measures of market activity. There is a well-defined link between (higher) volatility, (higher) trading costs and (lower) transaction volume.

Keywords:

• gold futures
• macroeconomic announcements
• high-frequency
• VAR-GARCH
• COMEX

JEL Classification:

• G00
• G10
• G14

Notes

¹ From 15 minutes prior to the scheduled announcement to 45 minutes after the announcement.

² Contract size is 100 troy ounces and minimum price fluctuation is $0.10 per troy ounce.

³ Securities Industry Research Centre of Asia-Pacific.

⁴ TRTH transaction data for gold futures are incomplete prior to this date.

⁵ Cai et al. (2001) identify CPI, GDP, and the unemployment rate (UNEMP) as important. Christie–David et al. (2000) add personal income (PINC) to the list, and others highlight the PPI.

⁶ AIC are utilized to obtain optimal lag length, with the first two lags reported here.

⁷ A VECH(1,1) specification is adopted on the basis of AIC and in consideration of computational issues.

⁸ The reported results are robust to the ordering of variables.