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Gold prices: Analyzing its cyclical behavior

Author

Listed:
  • Martha Gutiérrez
  • Giovanni Franco
  • Carlos Campuzano

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.

Suggested Citation

  • Martha Gutiérrez & Giovanni Franco & Carlos Campuzano, 2013. "Gold prices: Analyzing its cyclical behavior," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 79, pages 113-142.
    • Handle: RePEc:lde:journl:y:2013:i:79:p:113-142
    DOI: 10.17533/udea.le.n79a4
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    More about this item

    Keywords

    Gold cycle; DJIA/GF ratio; Fourier analysis; neural network forecast;
    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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