A gold market sentiment index was developed using 2010–2022 Eastmoney Guba Gold Forum data.
ChatGPT API was used to score post sentiment from -50 to 50, factoring in views and comment counts to build a daily sentiment index.
Regression analysis confirms that strong positive sentiment leads to higher gold futures returns and has short-term predictive value.
During crises like the U.S.-China trade war, COVID-19, and geopolitical conflicts, sentiment plays a crucial role in strengthening gold’s hedging function.
The study highlights the potential for social media-based sentiment analysis to be integrated into financial market predictions.
Opinion
ChatGPT-driven sentiment analysis proves to be a useful tool for predicting short-term gold futures returns, especially during periods of market uncertainty. The findings reinforce the idea that investors rely heavily on sentiment during volatile times, making social media-based sentiment indices a valuable addition to market analysis. However, since long-term predictive power is limited, investors should consider strategic applications carefully to maximize effectiveness.
Core Sell Point
The ChatGPT-based gold market sentiment index offers a short-term predictive advantage and plays a key role in enhancing gold’s hedging function during crises. This study underscores the growing potential of social media sentiment analysis as a viable tool for financial market forecasting.
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.
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