Commodities and Volatility: Sustainable Economic Development and Interplay of Oil and Gold

Abstract

In this research, we examine the relationship between oil & gold prices, how that relationship affects the volatility in the markets, and how these changes in volatility affect the transition to renewable energy for China. Through the use of advanced econometric modeling of historical data over a defined time frame, we derive the results which demonstrate that there is a strong independent link between gold price and oil price and that they are highly influenced by the general economic environment. We conclude that the relationships between commodity prices are very sensitive to the general economic environment, so when interpreting data on commodity price relationships, it is essential to consider the context in which they are being analysed. Our findings also indicate that gold & oil prices are extremely volatile and unpredictable, as evidenced by high volatility throughout our time frame for both commodities. The strong linkage of the commodity industry to the financial industry creates an opportunity for improved information on how to develop better predictions regarding how a commodity market is developing. This insight can be used by market analysts, financial professionals, and policymakers to make better decisions in the commodities sector. The implications show that changes in oil prices will impact policies concerning commodity markets, which in turn will enforce changes in the strategies of forecasting market experts, risk managers, and policymakers.