Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 28 December 2020

Modeling and Forecasting Gold Prices

Latifa Ghalayini, Sara Farhat

Lebanese University, Lebanon

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10.31014/aior.1992.03.04.314

Pages: 1708-1729

Keywords: Dynamic OLS, Exchange Rate, Gold Future Market, Gold Price, Oil Price, Open Interest

Abstract

The aim of this paper is to explore the reasons of gold price volatility. It analyses the information function of the gold future market by open interest contracts as speculation effect, and further fundamental factors including inflation, Chinese yuan per dollar, Japanese yen per dollar, dollar per euro, interest rate, oil price, and stock price, in the short-run. The study proceeds to build a Dynamic OLS model for long-run equilibrium to produce reliable gold price forecasts using the following variables: gold demand, gold supply, inflation, USD/SDR exchange rate, speculation, interest rate, oil price, and stock prices. Findings prove that in the short-run, changes in gold price does granger cause changes in open interest, and changes in Japanese yen per dollar does granger cause changes in gold price. However, in the long-run, the results prove that gold demand, gold supply, USD/SDR exchange rate, inflation, speculation, interest rate, and oil price are associated in a long-run relationship.

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