Forecasting gold price and inflation for India and US: An analysis of ARIMA and Holt Winters models

Abstract

Gold is a precious metal and a commodity that is in the spotlight in this new decade. In recent events, gold prices have globally been increasing due to wars, pandemics, and uncertainty in financial markets. We study the gold prices for developing and developed countries i.e., India and the United States (US) based on historical data from 1960 to 2020 and to understand the dynamic advantages of investment on gold in these countries. India and United States are huge markets for gold, and growing affluence is driving growth in demand. We have utilized an autoregressive integrated moving average (ARIMA) and Holt winters statistical models to analyze the trends and produce forecasts of gold price and inflation. We have also empirically investigated and validated the relationship between the gold price and inflation rates. We have concluded that gold is an excellent investment for Indian investors for both short and long-term returns as for the US investors, the gold investment being a part of their portfolio could be a hedge against inflation.

Keywords

• gold price
• inflation
• india
• united states
• arima
• holt winters