Determinants of commodity prices: A review of gold and oil prices

In the late of 20th centuries, investments in commodity markets have achieved a significant increase with developments in the financial markets and in the technology. Established through various commodity exchanges, the rules applicable in the stock markets have started to apply in commodity markets for speculators. In addition to the physical market forecasts, technical analysis applied with price movements used to determine the change in commodity prices. In this study, due to trading volumes in commodity markets and strategic importance discussed prices of the gold and oil commodities will be determining factors were investigated. The vector autoregression model (VAR) was established; the independent veriables are silver prices, the Dow Jones industrial index, USD Dollar-Sterling parity and the FED funds interest rate effects to the dependent veriables are gold and oil by impulse response analysis. The explanatory power of the gold and oil prices of the independent veriables are shown by variance decomposition. The results obtained were as follows: The effects of independent veriables on the World commodity prices have been shown to disappear after three or four months. But the past price datas of gold commodity explanation power has not been dropping below %97. Likewise, the ratio for oil as the commodity has been observed for at least %87. These results are important for investors' decisions. Key Words: Gold, Oil, Commodity Prices, Vector Autoregression Model, Impulse Response Analysis, Variance Decomposition