HomeArticlesServicePriceAbout

A recent study, Investor Sentiment in Gold and Gold Futures Market: Evidence from ChatGPT-Generated Sentiment Index, explores the use of ChatGPT to develop an investor sentiment index based on social media discussions about the gold market. This index is designed to capture investor sentiment in the gold futures market and assess its impact on price movements.

The study’s findings indicate that positive sentiment towards gold significantly boosts gold futures returns, and the sentiment index can serve as a short-term predictive tool. Additionally, the research highlights that during market crises, sentiment plays a crucial role in reinforcing gold’s hedging function.

Key Research Methods

• Data Collection: The study gathers post titles from the Gold Forum on Eastmoney Guba, a major Chinese stock market community, spanning from 2010 to 2022.

• Sentiment Scoring: ChatGPT API assigns a sentiment score to each post, ranging from -50 (highly negative) to 50 (highly positive).

• Influence Weighting: Each post’s influence is calculated based on views and comment counts.

• Daily Sentiment Index Construction: The study generates a daily gold sentiment index by multiplying each post’s sentiment score by its influence weight.

• Regression Analysis: The sentiment index is used as an independent variable to assess its correlation with gold futures returns.

• Crisis Period Analysis: The study examines the role of sentiment during four major crises—stock market crashes, the U.S.-China trade war, COVID-19, and the Russia-Ukraine war—to analyze gold’s function as a safe-haven asset.

Key Findings

1. Positive Gold Sentiment Drives Returns

• Increased Returns: Strong positive investor sentiment, as identified by ChatGPT, is statistically linked to higher gold futures returns. When investors have an optimistic outlook on gold, buying pressure rises, leading to price increases.

• Statistical Significance: The study confirms that this relationship is not random, demonstrating a meaningful connection between market sentiment and gold futures performance.

• Market Trend Formation: Investor sentiment not only affects short-term returns but also contributes to shaping market trends.

2. Short-Term Predictive Power of the Sentiment Index

• Predictive Indicator: The gold sentiment index can serve as a leading indicator for future gold futures returns.

• Short-Term Effectiveness: While effective for short-term forecasts, the sentiment index’s predictive power weakens over longer time horizons, suggesting that it is best suited for short-term trading strategies.

3. Enhanced Hedging Function During Market Crises

• Gold as a Safe Haven: During periods of economic and financial turmoil, investors tend to shift towards gold as a safe-haven asset, driving up demand and prices.

• Sentiment’s Role in Crises: The study finds that investor sentiment plays an even greater role during crises, influencing gold futures trading decisions.

• Strategic Implications: Accurately assessing market sentiment during times of uncertainty is critical for gold investors, and the ChatGPT-driven sentiment index provides valuable insights into investor behavior.

[Compliance Note]

• All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.

• The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.

• Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.