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Chicago Fed Letter

What Drives Gold Prices?

Craig Epstein, Adrian Lafont-Mueller, Robert Barsky, Younggeun Yoo

A half century after gold ceased to play a significant formal role in the international monetary system, it still captures a great deal of attention in the financial press and the popular imagination. Yet there has been very little scrutiny of the primary factors determining the price of gold since its dollar price was first allowed to vary freely in 1971. In this article, we attempt to fill in that gap by highlighting three considerations that are commonly cited as drivers of gold prices: inflationary expectations, real interest rates, and pessimism about future macroeconomic conditions.

Bank Exposure to Commercial Real Estate and the Covid-19 Pandemic

Kyle BinderAlejandro H. DrexlerEmily Greenwald, and Sam Schulhofer-Wohl

The Covid-19 pandemic had an immediate and substantial impact on the commercial real estate (CRE) market—emptying workplaces, shopping centers, and hotels, thus affecting the cash flows of businesses occupying commercial space and in turn the ability of commercial space owners to meet their debt obligations.

Managing Climate Risk in Mortgage Markets: A Role for Derivatives

Ketan B. Patel

In this article, I provide an overview of the mortgage securities market and how market participants manage the credit and interest risks traditionally associated with housing finance. I summarize some existing financial market risk-management tools for climate and weather. Next, I explain how climate risks can negatively impact property values, which in turn can impact the mortgage market. Then, I discuss how derivatives could play a role in managing such risks in the mortgage markets.

Measuring the Effects of the Covid-19 Delta Wave on the U.S. Hourly Labor Market

Scott A. BraveRoss Cole, and Stephanie Grove

In this article, we take a closer look at the implications of rising Covid-19 cases and vaccination rates for the U.S. hourly labor market. To do so, we rely on geographic variation in the high-frequency data collected by the firm Homebase with its timekeeping software. This data source allows us to make use of U.S. state-level variation on a daily basis in order to decompose the effects on hourly employees and hours worked from both rising cases and vaccinations.

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