Forecasting gold price with the XGBoost algorithm and SHAP interaction values

• Published in: Annals of operations research Vol. 334; no. 1-3; pp. 679 - 699
• Main Authors: Jabeur, Sami Ben, Mefteh-Wali, Salma, Viviani, Jean-Laurent
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.03.2024; Springer; Springer Nature B.V; Springer Verlag
• Subjects: Algorithms; Artificial intelligence; Business and Management; Combinatorics; Commodity prices; Economics and Finance; Forecasting; Foreign exchange rates; Gold; Humanities and Social Sciences; Machine learning; Macroeconomics; Mathematical models; Neural networks; Operations research; Operations Research/Decision Theory; Original Research; Precious metals; Prediction theory; Prices and rates; Regression analysis; Silver; Silver mines; Theory of Computation; Variables; France; C53; C22; Shapley additive explanations; C45; XGBoost; G12; Gold price; CatBoost
• ISSN: 0254-5330; 1572-9338
• DOI: 10.1007/s10479-021-04187-w

Financial institutions, investors, mining companies and related firms need an effective accurate forecasting model to examine gold price fluctuations in order to make correct decisions . This paper proposes an innovative approach to accurately forecast gold price movements and to interpret predictions. First, it compares six machine learning models. These models include two very recent methods: the eXtreme Gradient Boosting (XGBoost) and CatBoost. The empirical findings indicate the superiority of XGBoost over other advanced machine learning models. Second, it proposes Shapley additive explanations (SHAP) in order to help policy makers to interpret the predictions of complex machine learning models and to examine the importance of various features that affect gold prices. Our results illustrate that the utilization of XGBoost along with SHAP approach could provide a significant boost in increasing the gold price forecasting performance.