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Modelling the gold market, explaining the past and assessing the physical and economical sustainability of future scenarios

Sverdrup, Harald LU ; Koca, Deniz LU and Granath, Christer (2012) 30 th International Conference of the System Dynamics Society In [Host publication title missing]
Abstract
By using an integrated dynamic model we are able to reconstruct the supply and gold price of the past (1920-2010) and this is used to predict the future supply of gold to the market and to make a forecast of the goldprice 2010-2100. The model was validated against field data for the period 1920-2010 and it performs well. The model GOLD is implemented in the STELLA® software and the model described in the article. The simulation results show that the market is fundamentally driven by supply and demand, but that derivates trade and speculations have affected the market significantly to create large short term variations in price. The investigations show that during 1930 to 1971, the price was set by the governments of the US and UK, that... (More)
By using an integrated dynamic model we are able to reconstruct the supply and gold price of the past (1920-2010) and this is used to predict the future supply of gold to the market and to make a forecast of the goldprice 2010-2100. The model was validated against field data for the period 1920-2010 and it performs well. The model GOLD is implemented in the STELLA® software and the model described in the article. The simulation results show that the market is fundamentally driven by supply and demand, but that derivates trade and speculations have affected the market significantly to create large short term variations in price. The investigations show that during 1930 to 1971, the price was set by the governments of the US and UK, that after 1971 it was a functioning market and that during 1990-2000, the gold price was artificially depressed by foreward and derivates trade. On the theme of long term supply the model predicts a shift from high-grade ores to low-grade deposits as the main virgin supply source in the next 50 years, but that recycling will become the most important source of gold to the market. The authors predict a significant tightening of the gold market, with rising prices and a decreased derivates trade as compared to trade in the physical commodity. It has been claimed that foreward and derivates trade would stabilize the markets and the price. However, the model shows clearly that this is not the case, but that foreward and derivates trade create less stability and increase price fluctuations, but that they cannot prevent the long term trend from basic fundamental factors to set the long term levels. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Chapter in Book/Report/Conference proceeding
publication status
published
subject
keywords
Gold price, sustainability, commodity market
in
[Host publication title missing]
editor
Husemann, Elke and Lane, David
publisher
Proceedings of the 30 th International Conference of the System Dynamics Society .
conference name
30 th International Conference of the System Dynamics Society
ISBN
978-1-935056-09-6
language
English
LU publication?
yes
id
17489405-e552-406a-94db-30764e5f7df7 (old id 4812985)
date added to LUP
2014-11-24 22:56:15
date last changed
2016-04-16 08:19:15
@inproceedings{17489405-e552-406a-94db-30764e5f7df7,
  abstract     = {By using an integrated dynamic model we are able to reconstruct the supply and gold price of the past (1920-2010) and this is used to predict the future supply of gold to the market and to make a forecast of the goldprice 2010-2100. The model was validated against field data for the period 1920-2010 and it performs well. The model GOLD is implemented in the STELLA® software and the model described in the article. The simulation results show that the market is fundamentally driven by supply and demand, but that derivates trade and speculations have affected the market significantly to create large short term variations in price. The investigations show that during 1930 to 1971, the price was set by the governments of the US and UK, that after 1971 it was a functioning market and that during 1990-2000, the gold price was artificially depressed by foreward and derivates trade. On the theme of long term supply the model predicts a shift from high-grade ores to low-grade deposits as the main virgin supply source in the next 50 years, but that recycling will become the most important source of gold to the market. The authors predict a significant tightening of the gold market, with rising prices and a decreased derivates trade as compared to trade in the physical commodity. It has been claimed that foreward and derivates trade would stabilize the markets and the price. However, the model shows clearly that this is not the case, but that foreward and derivates trade create less stability and increase price fluctuations, but that they cannot prevent the long term trend from basic fundamental factors to set the long term levels.},
  author       = {Sverdrup, Harald and Koca, Deniz and Granath, Christer},
  booktitle    = {[Host publication title missing]},
  editor       = {Husemann, Elke and Lane, David},
  isbn         = {978-1-935056-09-6},
  keyword      = {Gold price,sustainability,commodity market},
  language     = {eng},
  publisher    = {Proceedings of the 30 th International Conference of the System Dynamics Society .},
  title        = {Modelling the gold market, explaining the past and assessing the physical and economical sustainability of future scenarios},
  year         = {2012},
}