Artificial Intelligence on the Price of Gold
January 18, 2024. What does artificial intelligence, specifically ChatGPT, think about the future significance and price of gold? Will it offer a deeper insight based on the vast amount of data it had to process during the learning process, which might elude a human mind?
Uncertain Future
Initially, I received more general responses and information, stating that the future is uncertain and predicting it is complex. ChatGPT wasn't created as a model for predicting the prices of stocks, gold, and other financial instruments.
One response that amused me mentioned the need for empirical data analysis. When I pointed out that, during its training, it undoubtedly processed a massive amount of data that could serve as empirical analysis, it was considered a valid point. However, the conversation continued to revolve around the uncertainty, the potential for unknown circumstances, and the likely need for human oversight over the model's settings and adaptation.
Thus, I attempted to extract specific insights based on its knowledge, acknowledging that even the best model cannot account for all possible situations. Nevertheless, artificial intelligence has the advantage of processing a vast amount of data and factors simultaneously, and through neural networks and decision trees, it can work with the probability of various events.
Figure 1: Artificial Intelligence on the Price of Gold (source: Craiyon)
General Considerations for Gold's Future
These are general factors that, according to ChatGPT, should be considered when trying to understand the future position of gold and its price.
Economic Conditions
Gold is often influenced by economic conditions. If there are global economic uncertainties, inflation pressures, or geopolitical tensions, investors may turn to gold as a safe haven.
Interest Rates
Central bank policies and interest rates play a significant role in the price of gold. Low interest rates and loose monetary policy, such as quantitative easing, can contribute to a favorable environment for the growth of gold prices.
Inflation Hedge
Traditionally, gold is seen as a hedge against inflation. If there are concerns about rising inflation, it can positively impact the demand for gold.
Supply and Demand Dynamics
The future of gold is also influenced by the dynamics of supply and demand. Factors such as new discoveries, mining costs, and global demand for jewelry and industrial use of gold can affect the overall balance.
Technological Innovations
Advancements in technology and changes in industrial demand for gold can influence its future. For example, the development of alternative materials for electronic components may affect the demand for gold in certain industries.
Limitations in Prediction
Predicting the future of any commodity, including gold, involves uncertainties and unexpected events. Factors such as geopolitical events, economic changes, and technological innovations can significantly influence the trajectory of gold prices.
Hypothetical Analysis of Factors for Gold Price Prediction
Finally, I managed to obtain some more specific information from the artificial intelligence, namely factors that it considers crucial and assigned them weights. It presented the following simplified model with several common factors influencing the price of gold:
- Interest Rates (Weight: 25%). Inverse relationship: higher interest rates may lead to lower gold prices, and conversely, lower interest rates lead to an increase in the price of gold.
- Inflation (Weight: 20%). Positive relationship: gold is often considered a hedge against inflation.
- Geopolitical Tensions (Weight: 15%). Positive relationship: increased tension may lead investors to seek safe havens such as gold.
- Global Economic Growth (Weight: 15%). Inverse relationship: strong economic growth may reduce demand for gold.
- Strength of the U.S. Dollar (Weight: 10%). Inverse relationship: a stronger dollar usually suppresses gold prices, while a weakening dollar increases the price of gold.
- Supply and Demand Dynamics (Weight: 10%). Positive relationship: changes in production and demand for gold can affect prices.
- Technological Trends (Weight: 5%). Variable relationship: innovations affecting the industrial use of gold may impact prices.
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Based on the original Czech article: Umělá inteligence o ceně zlata.