Return predictability in metal futures markets: new evidence

Abstract

This paper studies the predictability of metal futures returns. Additionally, we identify years of high predictability. Generally, we find a substantial degree of predictability both in- and out-of-sample. Gold returns seem to be best predictable out-of-sample. A timing strategy leads to utility gains of 2.18% p.a. In particular, the Aruoba–Diebold–Scotti (ADS) business conditions index incorporates relevant information for metal returns, and strongly predicts gold returns.