We investigate whether and to what extent macroeconomic uncertainty predicts the volatility of commodity futures. By examining 26 commodities in six categories, we find that the measure of aggregate macroeconomic uncertainty based on a large dataset has a significant predictive effect for commodity volatility. The predictive relationship holds both in-sample and out-of-sample after controlling for lagged volatility. The extent of the predictability differs by commodity category, with energy, precious metals, and industrial metals futures having the most significant effect. For all commodities, the predictive power of macroeconomic uncertainty is stronger in more recent data and during recessions.
Huang, Z., Liang, F., & Tong, C. (2020). The predictive power of macroeconomic uncertainty for commodity futures volatility. International Review of Finance, 21(3), 989–1012. Portico. https://doi.org/10.1111/irfi.12310