Psychological barriers in gold prices?
This 2007 paper examines whether psychological barriers exist in gold prices at round numbers, for OTC and exchange traded spot prices as well as futures prices measured in us dollars. The abstract states that:
This paper examines for the first time the existence of psychological barriers in a variety of daily and intra-day gold price series. This paper uses a number of statistical procedures and presents evidence of psychological barriers in gold prices. We document that prices in round numbers act as barriers with important effects on the conditional mean and variance of the gold price series around psychological barriers.
Barriers are found in daily data but not in intraday data, possibly due to the time period under consideration. Barriers are found to exist at the 100’s level in this data. For all data used there is strong evidence that the conditional volatility of gold returns changes when near or after crossing a barrier, particularly when coming down through a barrier.
Method: Uses Uniformity Tests, Barrier hump and proximity tests and test for conditional effects.
Data: Am Gold Fixings from 2/1/80 to 31/12/00. Daily COMEX Cash and Futures 2/1/82 – 27/11/02. 15 Min Intraday data supplied by UBS 28/8/01 – 09/01/03.
Full Citation: Aggarwal, R. and B. M. Lucey (2007). “Psychological Barriers in Gold Prices?” Review of Financial Economics 16(2): 217-30.