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Financial Analytics: Science and Experience
 

Identification and use of key indicators to predict trends in the market of gold

Vol. 8, Iss. 3, JANUARY 2015

PDF  Article PDF Version

Available online: 28 January 2015

Subject Heading: Financial market

JEL Classification: 

Pages: 2-8

Simonova L.M. Tyumen State University, Tyumen, Russian Federation
lsim@utmn.ru

Timofeev A.A. Tyumen State University, Tyumen, Russian Federation
timofeev_aa91@mail.ru

Importance Due to the growing popularity of investments in precious metals, there is a need to study forecasting trends in the gold market, and the efficiency of technical indicators in this market.
     Objectives In this regard, the research aims to identify the most efficient indicators to predict the gold market trends.
     Methods The paper is studying the technical analysis indicators in the gold market with the view of identifying the most useful effective trends for forecasting. The informational-empirical background comprises the periodical press materials and the archives of the MetaTrader platform quotations. As the research result, we have found that the most productive indicators proved to be as follows: 17-month and 11-month moving average indicators, 35-week and 55-week moving average indicators, VIX volatility index, Fibonacci levels and divergences on the RSI (Relative Strength Indicators) with parameter 9. The article also considers the correlations of the gold and silver quotes with the US dollar index. The paper also develops recommendations on the usage of these correlations in determining the forthcoming gold trend.
     Results We found that in case of decision-taking by the investor on settlement of gold transactions and based on the signals of obtained indicators, the investor could have made profit amounting to 372% for the last 10 years, while the gold itself have increased by 210% over this period.
     Conclusions and Relevance We conclude that the obtained research indicators help correctly forecast a long-term trend, which is easily confirmed by the historical testing of the indicators in the graph of gold since 2004.

Keywords: investment, gold, noble metal, intermarket analysis, divergence, technical indicator, correlation, moving average

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