Thursday , 17 August 2017

For Mathematicians Only: A Precise Gold Price Prediction Formula

I have developed a formula that has predicted gold price precisely over the last 12 years. if it continues in a similar fashion for the next few years we should see gold at $4,875 a troy ounce in 2015. Words: 438

So says Silverbach in edited excerpts from a post* on the blog which Lorimer Wilson, editor of (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)

Silverbach goes on to say, in part:

The formula does not predict the day-to-day movements but, long-term, the gold price is pretty much right on the precise spot where the predicted price trend is. See the chart.

Here is how the formula is derived. It applies accurately to ALL hyperinflation [events that have] ever occurred in human history, including the Weimar Republic and Zimbabwe inflation.

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First, let’s consider how inflation happens. Gold is considered a constant valuation. Gold price appreciation indicates inflation, nothing more and nothing less. The gold price can be written in the following generic formula, which is generally correct, as prices change in percentage, i.e. geometric term. You just need to choose the proper time dependent function Y(T):

P = P0 * exp(Y(T))

The time function Y(T) increases over time. The increase of Y(T) is the inflation and depreciation of the currency. So let’s look at what Y(T) should look like.

In the constant inflation scenery, gold price should increase the same percentage each year, therefore Y(T) would simply be proportional to the time, t, therefore

Y(T) = C*T (constant inflation)

Inflation is not constant, however. At first, there is almost no inflation and then inflation increases over time. The rate of inflation also increases in percentage terms. Thus Y(T) = exp(y(T)). So we should write gold price as:

P = P0 * exp(exp(y(T))),

with an increasing y(T) reflecting an increasing inflation rate.

Finally, the acceleration of inflation itself is not a constant. The faster the inflation accelerates, the faster they need to print more money and it speed up the acceleration of inflation further. So we expect that y(T) itself increases geometrically. Thus we can expect that acceleration of inflation is:

y(t) = exp(C*(T-T0))

Putting everything together, we obtain an elegant math formula of gold price under inflation. Elegant because there are only two adjustable parameters: the starting time T0, and acceleration factor C:

P = P0 * exp(exp(exp(C*(T-T0))))

I find that using the constant C = 3/80 = 0.0375 gives a perfect gold price match for the past 12 years:

P = $15.00 * exp(exp(exp(0.0375*(T-2000))))


The plotted chart above shows that the gold price goes up exactly according to the predicted curve.


Editor’s Note: The above article has been has edited ([ ]), abridged, and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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