The mathematical model of gold prices... And beyond!



The so complex and elusive mathematical modeling of gold prices historically escapes in the short and long term the bases of supply and demand they do not allow themselves to be modeled overtime only by factors such as real inflation, the interest rate, the strength (or weakness) of the dollar registered in the DXY index or by the uncertainty levels of the VIX index.

Mostly risk aversion or rejection measured as call and put options is one of the factors that monitor gold prices in the short term. In these times of IoT, big data and digitization, will it be possible to increase knowledge and more accurately model gold prices? Our team of professionals developed a stochastic model that correlates with the real data, adjusts with an R2 of 0.89, follows trends in Gold prices and is robust to the statistical criteria of independence, heteroscedasticity, and non-collinearity of the residuals. . The following graph shows the results of the model vs. the actual monthly data of Gold prices.


Graph1: Modeling of Gold prices generated from St. Louis Fed 2003-2019 macroeconomic data. It is statistically robust and all of its forecasts are within its 90% confidence levels.

The results of the model continue to be updated and monitored with macroeconomic data and levels of global uncertainty. News shocks impact short-term estimates, and it is interesting to see that the model quickly maintains the results within its confidence levels (90%).

What would be the applications of this econometric model?

Initially a good benchmarking for Gold mining companies- such as Newmont Goldcorp, Barrick Randgold, Anglogold, Agnico, Kinross, Buenaventura- in the estimated gold price for the formulation of their quarterly forecast and annual budget plans. For short term investments with call/put options and iron condor strategies, it would be a good proxy. For potential stop loss and take profit levels in investments with shares of gold mining companies on the stock exchange.
Ubicación: Chile

Comentarios

Publicar un comentario

Entradas más populares de este blog

The stock market still does not reflect reality, but Citigroup warns that pain and "collateral damage" are on the way

Imagen
The first week of June starts with all the SPX, Nasdaq, and Dow Jones indices (14:30 hours), rising an average of 0.44%. Citigroup, one of the largest banks in the world (current market capitalization of US$ 98.5 trillion), says that the rise in the stock market does not reflect reality, and there will be collateral damage. The price of gold rises by 0.4% to $1,739/Oz at that time. At AXL Capital, we see that this reflects a high level of competition between those who are betting on the market's recovery in line with the rampant economic reopening in the US and the global injection of dollars underway, versus large investors who in April and May were able to reap the benefits of years and raise their cash levels as Warren Buffet - one of the largest investors of all time - did, pointing to a new, healthy and significant market downturn reflected in a worldwide Recession, technically for the second quarter of the year due to the effects of the COVID-19 according to the
Leer más

The economy is in recession, and gold is shrinking

Imagen
At AXL Capital, we believe that gold will NOT steadily decline until the COVID-19 vaccine passes Phase 3 and is approving by the FDA, then, the aftermath of the pandemic will continue, and companies-and countries-will face the big issue of their high debts. In the words of investment guru Ray Dalio, the big challenge is to achieve beautiful deleveraging. According to the data published today 08/30, the US economy accumulated to the second quarter a setback -32.9% due to the effects of the closing of businesses, lower speed of money, therefore, lower consumption per capita due to the Coronavirus pandemic. For that reason, Wall Street is declining, with the Dow Jones index at -1.24%; Also, due to a request to postpone the US presidential elections beyond November 2020. On the other hand, golds join the general decline and fall from its historical maximum yesterday, 29/07, to 1,980 US$/oz (after more than ten consecutive days of rising), currently standing at 1,947 US$/
Leer más

The economy in times of coronavirus

Imagen
The Holistic vision by the Engineer Roque Benavides is a very clear explanation of speak of the Economy in times of virus crown and giving the structured approach as the vision of containment, reactivation, Investment with economic, social development, respect for the environment and health care for the workers. @Roque_Benavides: The coronashock is unprecedented. Characteristics of the crisis: Abrupt shock in productive capacity that immediately passes to the financial markets.   Fast and severe: The collapse in the markets (of the equity market and debt) occurred in three weeks. Simultaneous recession in developed and emerging economies. Key characteristics of a scenario for the year 2020: Until after winter, restrictions on some economic activities and the free movement of people. Fiscal response to the crisis equivalent to or more than 3% of GDP. The economic balances of companies and families significantly affected. High credit risk. Deteri
Leer más