Research of the Influence of Macro-Economic Factors on the Price of Gold

This paper shows the dy namics of gold prices in the Gold Exchange in NEW YORK using a dataset that includes global macroeconomic indicators, financial market indices, quantities and prices of energy products. We extract common factors from the panel data series and estimate a Factor-Augmented Vector Auto-regression for gold prices. It shows that a factor correlated to purely financial developments contributes to the model performance, in addition to factors related to gold reserves and energy prices. This paper has two main contributions. First, all factors influencing the gold market have been classified into three groups, that is, gold reserve and prices of energy products, financial market indices, global macro- economic indicators. We can see that the effect of financial market indices and macroeconomic indicators to gold price is negative, the effect of gold reserve and prices of energy product to gold price is positive. Second, we apply the FAVAR model to analysis factors influencing gold price and the trend of gold price.