This thesis studies Markov-switching model and its applications in commodity markets with a long historical data series. The background theory of Markov chain is summarized, and the Markov switching model is introduced and discussed. Then, literature surrounding the Markov-switching model is reviewed from the earliest iterations of Hamilton to recent development. The research imposes the features of Markov regime-switching models, considering gold as a financial asset to offer a comprehensive methodology for forecasting commodity price. We show that applying Markov regime-switching could significantly improve the forecast abilities in commodity prices. The analysis indicates that the abnormal increases of gold price in history always resulted from special economic conditions. This study makes a novel contribution to the field by demonstrating that the impact of CPI change to gold price is subject to the regimes, which is more sophisticated than what has been commonly accepted in economics literature to date.