Predicting Gold Price movements using ARIMA Model

Abstract

Gold is an enticing investment not only for individuals but also for firms and governments around the world. According to International Monetary Fund (IMF) recent reports the central banks around the world hold gold worth US$2 trillion which is accounted for about 16% of world gold reserves. World’s largest economies such as USA, Germany, Italy, France and Russian federation are the top five economies with largest percentage of gold reserves. Besides India and China are the top spots for largest retail gold consumers with around 57% demand for the gold jewellery. This inquisitiveness of gold among different sects of the economies is an indication of demand for the gold in various forms. Whether gold as an investment or as a reserve has the power to change an economy’s trajectory. Keeping Gold’s potential in view the present study is an attempt to forecast future gold prices in India using historical gold prices from November,2020 to April 2024. The forecasted values for the period of May,2024 to April,2025 are an approximate value computed using Auto regressive moving averages (ARIMA) model. The forecasted values indicated stable and cyclical trends which are not too distant from past and present scenarios. The study concluded that the cyclical and stable trends if studies instance to instance wise would generate more accurate and sophisticated forecast values.