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Gold prices: Analyzing its cyclical behavior

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  • Gutiérrez, Martha
  • Franco, Giovanni
  • Campuzano, Carlos

Abstract

ABSTRACT: Gold is a commodity that is seen as a safe haven when a financial crisis strikes, but when stock markets are prosperous, these are more attractive investment alternatives, and so the gold cycle goes on and on. The DJIA/GF (Dow Jones Industrial Average and Gold Fix ratio) is chosen to establish the evolution of gold prices in relation to the NYSE. This paper has two goals: to prove that the DJIA/GF ratio is strongly cyclical by using Fourier analysis and to set a predictive neural networks model to forecast the behavior of this ratio during 2011-2020. To this end, business cycle events like the Great Depression along with the 1970s crisis, and the 1950s boom along with the world economic recovery of the 1990s are contrasted in light of the mentioned ratio. Gold prices are found to evolve cyclically with a dominant period of 37 years and are mainly affected by energy prices, financial markets and macroeconomic indicators. RESUMEN: El oro es un bien básico que se ve como refugio cuando una crisis financiera acontece; pero cuando los mercados de valores son prósperos, las acciones son una alternativa más atractiva, y así se da el ciclo del oro. El DJIA/GF (relación entre el Índice Industrial Dow Jones y el precio del oro) permite establecer la evolución de los precios del oro en relación con el NYSE. Este trabajo tiene dos objetivos: demostrar que la relación DJIA/ GF es fuertemente cíclica usando análisis de Fourier, y establecer un modelo de redes neuronales para predecir el comportamiento de esta relación durante 2011-2020. Para ello, eventos económicos cíclicos como la Gran Depresión junto con la crisis de los anos 70, y el auge de los anos 50 junto con la recuperación de los 90, se contrastan a la luz de la relación DJIA/GF. Se encuentra que los precios del oro evolucionan cíclicamente con un periodo dominante de 37 anos y están afectados principalmente por los precios de los energéticos, los mercados financieros e indicadores macroeconómicos.

Suggested Citation

  • Gutiérrez, Martha & Franco, Giovanni & Campuzano, Carlos, 2013. "Gold prices: Analyzing its cyclical behavior," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 79, pages 113-142, September.
    • Handle: RePEc:col:000174:014748
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    References listed on IDEAS

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    More about this item

    Keywords

    Ciclo del oro; relación DJIA/GF; análisis de Fourier; pronóstico de red neuronal;
    All these keywords.

    JEL classification:

    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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