Analysis of the Effect of Macroeconomic Variables on Fluctuation of Future Gold Market in Iran

The future value of gold coins has received much attention in the world for its risk-taking function. The introduction of this tool into the Iranian financial market was not initially welcomed, but over time it was welcomed by investors in the futures market. Therefore, the volatility of gold coin futures trading and its influencing factors is important. In this study, the effect of macroeconomic variables affecting the volatility of gold coin futures trading is with GARCH MIDAS Model investigated. Therefore, in this study, the effect of selected macroeconomic variables (inflation, exchange rate, oil price and liquidity) and changes of each of these variables have been investigated on future gold market in Iran during the period of 2009-2017. In order to estimate the model, the effect of each of the variables on the gold coin futures fluctuations is first investigated individually. Then, using the principal component analysis, the macro variables index was extracted and estimated in the model. The results indicate a significant effect of macro variables on the future fluctuation of gold coins. Rising inflation and rising oil prices lead to a long-term component of the currency and the exchange rate will reduce the volatility of gold coin futures.