Unconventional Monetary Policy and Commodity Markets

ABSTRACT This study uses continuous wavelet tools to investigate the co‐movement between US quantitative easing (QE) policy and commodity price indices. The findings show that commodity markets dynamics are interconnected, particularly during times of stress and high uncertainty. Conversely, the precious metals price index displays areas of weak power throughout the period studied (January 1999–March 2025). Although strong coherencies can appear at high frequencies in short‐run cycles, they quickly shift toward low‐frequency cycles during times of stress, underscoring the substantial contagion effect of the Federal Reserve's QE policy on commodity markets during such times. In the aftermath of the 2008 crisis, the Federal Reserve's QE initially drove commodity markets. However, the situation has since reversed, and the US QE policy has started to lag the dynamics of commodity markets. The findings also reveal that the influence of the US QE on precious metal markets has been rather modest. Since the first quarter of 2020, the co‐movement between the US monetary policy and commodity markets, especially in the energy sector, has increased at high and medium frequency bands.