Is Gold Overpriced?

[MachineGhost]

We investigate the relationship between the price of gold and relevant factors from April 1968 to March 2012. The gold price was determined by market forces during this period and has been on an upward trend since 2001. We identify seven underlying factors for gold price movement: unemployment rate, GDP growth rate, expected inflation rate, U.S. dollar index, Dow Jones Industrial Average return, 3-month U.S. treasury bill yield, and oil price. The employment of quantile regression enables us to investigate the impacts of these factors on the gold price when the gold price at different levels. Thus quantile regression provides a natural tool to evaluate the overpricing issue as recent gold prices are at historical highs and remain at the right tail of the distribution. Using the data from 1968 to 2008, we derive the joint effects of seven factors in a linear multi-factor model and then use the derived estimates to forecast the price of gold for each month from January 2009 to March 2012. We find that by quantile regression the price of gold is not overvalued although OLS implies gold is overpriced for the period of January 2009–March 2012. Also, we make simple forecasts by constructing two economic scenarios for the U.S. economy. The QR framework predicts that the price of gold will fall to $1,123 with a one standard deviation range of ($883, $1,362) if the U.S. economy returns to its long-run economic average. However, if the recent U.S. economic trends continue, then the QR predicts that the gold price will remain at $1,582 with a one-standard deviation range of ($1,325, $1,838).

https://papers.ssrn.com/sol3/papers.cfm ... id=2157666

[stone]

I've only given it a glance so far but IMO they may have missed what gold is about. They talk about the USDX but that is a basket of developed world currencies (Yen, Euro, GBP etc). Those make up a smaller and smaller proportion of global economic activity. IMO the gold price in USD links to what proportion of GLOBAL wealth is accounted for by $1USD. Imagine a future where all of China, India, South East Asia and Africa is as prosperous as Singapore is now whilst the current developed world indulges in Greek style austerity shenanagans. Such a scenario would make a total mockery of this model.

[Libertarian666]

I suggest anyone who believes this should definitely short gold for all he's worth.