Abstract

The price of gold has risen dramatically since 2001 and there have been intense debates regarding the current price of this asset and its long-term outlook.  Here we study a long history of the price of gold and construct a quantile regression model to identify distributional relationships between the price of gold and macroeconomic indicators, financial market performance and other relative factors. We find that while the traditional mean methodology indicates that gold is overpriced, the distributional results from quantile regression imply that gold is not overpriced in the current economic and financial environment. We provide gold price forecasts based on two economic scenarios that cover both the long-run economic environment as well as the recent economic environment experienced in 2009 and 2010. 

Bios

George Patterson, CFA, CFP, PhD

Senior Vice President, Chief Investment Officer, Quantamental Strategies

George is the Chief Investment Officer of BMO Asset Management’s Quantamental Stragegies, a unique approach that blends quantitative techniques and fundamental insights, and  brings over 17 years of investment experience to BMO Asset Management Inc.  Prior to joining the organization, George was a founder and Managing Member of Menta Capital LLC where he oversaw investment research, portfolio management and technology. He spent the bulk of his investment career at Barclays Global Investors (BGI) where he was a Managing Director and head of market neutral portfolio management for US and Global strategies. Prior to heading up the portfolio management team, George worked in a variety of groups at BGI and was responsible for developing many of the investment models used at BGI. He earned a Ph. D. in physics from Boston University, and an S.B. in physics from the Massachusetts Institute of Technology.  After earning his doctorate in physics, George was a post-doctoral associate at the NASA Jet Propulsion Laboratory in Pasadena, CA making him one of the few investment managers to actually have been a “rocket scientist”.

Lingjie Ma, PhD

Director of Research, Quantamental Strategies

Lingjie brings nine years of investment experience to the BMO Asset Management Inc. where he oversees the research efforts of the Quantamental investment team.  Prior to joining BMO Asset Management Inc., Lingjie was a senior analyst and group leader of research in the active quantitative equity department of Deutsche Bank.  Before that, Lingjie worked as a senior portfolio and research manager at Northern Trust where his main responsibilities were to build and manage global active equity portfolios.  He also worked as a portfolio manager and researcher at PanAgora Asset Management where he conducted research and managed quantitative portfolios across different regions and styles.  Lingjie earned a Ph. D. in Economics and a Masters in Statistics from the University of Illinois at Urbana-Champaign. He also received an M.A. in Finance from Nankai University and a BS in Mechanical Engineering from Shandong Institute of Technology in China.

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