Can Google Trends Predict the Price of Gold?
In a recent post, we looked at the relationship between search volume for the keywords “oil price” and the actual price of oil. Today we are doing the same analysis, except for gold.
Here are some Google Trends searches for different related keywords: “gold”, “gold bubble”, and “gold price”.
Google Trends Search Volume for "Gold"
Google Trends Search Volume for "Gold Bubble"
Google Trends Search Volume for "Gold Price"
Now, let’s see if we can find a relationship between the search volume and price of gold. I put the price of gold on top of the above graph for “Gold Price”.
.Search Volume for "Gold Price" and Price of Gold
The red numbers indicate the price of gold. Although the relationship is not immediately clear, I did notice one interesting pattern. The search volume in 2004 averaged 0.57, which increased to 1.5 in 2009. So that is an increase of about 3 times.
The actual price of gold went from $400 per ounce in 2004 to an average of about $1,000 per ounce in 2009. That is an increase of about 2.5 times. So, it seems that on a monthly basis the two values are not highly correlated, but on an annual basis they seem to be more connected.
How can we use this information?
That is the million dollar question. I don’t see any immediate way to use the above relationship. However, perhaps there may be other sources of collective intelligence that would be useful. For example, the Trends data for “gold bubble” just started at the end of 2007, but maybe if we had more accurate data it could be more useful. Also, the news reference volume seems like it might be highly correlated, but there does not seem to be a way to download it into Excel to analyze, and the image seems too small to be useful.
Hopefully that provided some interesting ways of analyzing Google Trends and the price of gold.
Related posts:
- Can Google Trends Predict the Price of Silver?
- What does the Recent Oil Bubble tell us about Gold?
- Gold and the S&P 500: What is the Future Price of Gold?
- What’s Behind Gold’s Price Swings
- Gold Blog Roundup
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I'm George Ulmer. Matt and I started this blog and launched the Online Investing AI business. Our goal is to develop the technology to allow anyone to retire after working for 10 years.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
This is an interesting theory. It might be interesting to try some more specific keywords like “buy gold”. It would also be interesting to see if more people Google “price of gold” after they have purchased as they have buyers anxiety.
I also doubt many of the ‘smart money’ decision makers are using Google to get the price of gold. So many of the decisions would not register on Google in any way.
This would be a fun experiment to do with brand names. Does Apple’s stock price and ipod show any correlation.
Hi Ryan,
Thank you for your thoughtful comment. Yes, perhaps “buy gold” or other keywords will have clearer relationships to the price. I think it is possible to extend these ideas to many other assets including stocks (like Apple!). We’ll keep doing research. Let us know if you have any other thoughts!
George
Very interesting theory, in internet age, any human desire sees a virtual gateway and yes, may be these could be the sentiment plugged price index, but whatever it is, it seems that sentiments hitting on internet are one of the driving force for the prices, now from here. Ofcourse, increase in internet populance or the number of netusers as well as data-analytics in terms of hits for specific geographies would still help in analyzing these trends, in a very consumer specific mode. But, it is really intersting.
I think that it could have a pretty decent effect on the price of gold. It’s more of a social effect when people start searching like that. Definitely an interesting correlation though.