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An overview of global gold market and gold price forecasting

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  • Shafiee, Shahriar
  • Topal, Erkan
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    Abstract

    The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.

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    Bibliographic Info

    Article provided by Elsevier in its journal Resources Policy.

    Volume (Year): 35 (2010)
    Issue (Month): 3 (September)
    Pages: 178-189

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    Handle: RePEc:eee:jrpoli:v:35:y:2010:i:3:p:178-189

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    Web page: http://www.elsevier.com/locate/inca/30467

    Related research

    Keywords: Historical gold market Forecasting mineral prices Long-term trend reverting Jump and dip diffusion;

    References

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    Cited by:
    1. Jain, Anshul & Ghosh, Sajal, 2013. "Dynamics of global oil prices, exchange rate and precious metal prices in India," Resources Policy, Elsevier, vol. 38(1), pages 88-93.
    2. Hossein Hassani & Emmanuel Sirimal Silva & Rangan Gupta, 2014. "Forecasting the Price of Gold," Working Papers 201428, University of Pretoria, Department of Economics.
    3. Mihaela NICOLAU & Giulio PALOMBA & Ilaria TRAINI, 2013. "Are Futures Prices Influenced by Spot;Prices or Vice-versa? An Analysis of Crude;Oil, Natural Gas and Gold Markets," Working Papers 394, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Haque, Md. Aminul & Topal, Erkan & Lilford, Eric, 2014. "A numerical study for a mining project using real options valuation under commodity price uncertainty," Resources Policy, Elsevier, vol. 39(C), pages 115-123.

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