The Best Thinking in Business Analytics from the Decision Sciences Institute

4. Are Gold Prices Moved by Oil and the S&P?

—Mary Malliaris, Loyola University Chicago

Abstract

We developed clusters on a training set and then used the cluster assignment and derived variables as inputs into a support vector machine model. The results show that both oil and the S&P play an important part in forecasting gold’s direction tomorrow. The support vector machine does a very good job predicting Up movements but is not reliable at predicting Down days. We used a 24-year training horizon to forecast daily for the next 25 months. The results were stable over the two-year-plus period, with Up-direction forecasts correct 84% of the time and Down-direction forecasts correct 21% of the time.

Introduction

Predicting price movement in gold ...