How do macroeconomic news surprises affect round-the-clock price discovery of gold? |
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| Institution: | 1. Department of Finance and Business Economics, University of Delhi (South Campus), Benito Juarez Marg, New Delhi, India;2. Refinitiv, India;1. School of Accounting, Information Systems & Supply Chain, RMIT University, 445 Swanston, Melbourne, VIC 3000, Australia;2. School of Accounting, Information Systems & Supply Chain, RMIT University, 445 Swanston Street, Melbourne, VIC 3000, Australia |
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| Abstract: | We examine round-the-clock international price discovery of gold among the major gold markets—New York, London and Shanghai during news-intensive and no-news time zones using one-minute data. Using GMM based parallel price discovery measure, we find global leadership of the US as New York gold futures lead across five time zones with 56% information share. New York/London (Nylon) timezone (51%) is the most informative trading session in sequential price discovery for all markets in 24-h. Our aggregate and disaggregate news analysis reveals that the US news surprises have a substantial and positive impact on its price discovery leadership while Eurozone news surprises have a negative impact and Chinese news have negligible impact. Using least absolute shrinkage and selection operator (LASSO) regression, we find scheduled news with a large surprise index has a significant yet asymmetric impact as negative news triggers a strong reaction. The impact of news surprise is state-dependent and display sign-reversals during extreme uncertainty, adverse macroeconomic conditions and abnormal investor behaviour. |
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