Forecasting world gold price in year 2022 using Geometric Brownian Motion model

Abstract

Gold is always outperformed other investments during economic recession. On top of that, gold mining industries is also highly depends on the world gold price in decision-making on mining projects. Thus it is crucial to forecast gold market price in future to help investors and mining sector in decision making. The aims of this study is to forecast the world gold market price for year 2022 using Geometric Brownian Motion (GBM) model and further to evaluate the suitability of the GBM model in forecasting during unexpected situations such as the Covid-19 epidemic. The accuracy of this model in forecasting world gold price been measured using Mean Absolute Percentage Error (MAPE). The gold price data set was collected from Yahoo Finance and composed of 1542 observations from 19th September 2016 to 19th September 2021. The MAPE value produced by GBM model were 12.21% which illustrates a good accurate. This indicate the GBM model able to forecast the world gold prices even during unexpected situation such as Covid-19. Lastly, the GBM model forecasting results shows an increasing trend for the world gold price in year 2022.