Hi everyone,
I'm building a fair value model for gold and I'm trying to identify the most meaningful macroeconomic drivers rather than just throwing every variable into the model.
My goal is to estimate whether gold is trading above or below fair value over the medium to long term.
So far I'm considering variables such as:
Real interest rates (10-year TIPS yields)
US Dollar Index (DXY)
Inflation expectations / breakeven inflation
Central bank gold purchases
Global money supply (M2)
Fed Funds Rate
Treasury yields
Geopolitical risk
I'm trying to avoid overfitting and would rather have a smaller number of economically justified drivers than dozens of weak correlations.
If you were building a gold fair value model from scratch, which variables would you include, and why? Are there any academic papers or professional research pieces you'd recommend?
Thanks in advance!