To follow up on my blog # 8 regarding the study of Gold Price as Stable Reference Value, it is interesting to make further study on how this value correlates with the dynamic Exchange Rate of some currencies of interests in the same selected period of time.
The result from previous blog will be used here as reference, including the previously selected trend line. However, this study will be limited to the graph of the 1st Semester of 2011 using the data from , as below:
Figure 1 : Gold Price in the 1st Semester of 2011 , with trend-line
As comparison in the same time period, below are the currency exchanges of Indonesian Rupiah [IDR], European Euro [EUR] and Chinese Yuan Renminbi [CNY] to the American Dollar [USD] from :
Figure 2a-c : The Exchange Rates of IDR, EUR and CNY to USD in the 1st Semester of 2011  with trend-lines
The selection criteria will be the same for all approaches, namely:
Data period from January 1st to June 15th 2011
The 3rd Order Polynomial Trend Line and R2 coefficient
The use of Statistical Process Control
Analysis and Comparison of Alternatives
To compare the input data and graphs, the R2 coefficient comparison for the exchange rates of IDR/USD and CNY/USD are very acceptable and the exchange rate of EUR/USD is still not as good as the other two but still acceptable, whereas the USD/Oz Gold is only passable due to very huge fluctuation, as shown in the below table:
Table 1 : R2 coefficient Result
To be noted here is the R2 coefficient
for the USD/Oz. Gold already changed to worse from previous blog, since the data used is limited from January 1st to June 15th, 2011.
All Exchange rates show declining graph with a trend to get better in the near future, where at the other hand the Gold Price USD /OZ. is showing a fluctuating increase with a trend to decline in the near future.
Using the Gold price in Figure 1 converted to each currency in Figure 2 gives us the following table and graphs:
Table 2 : Gold Price in Different Currencies and Their Statistical Parameters
Figure 3 : Control Chart for Gold Price USD/Oz.
Figure 4a-c : Control Charts for Gold Price IDR/Oz., EUR/Oz. and CNY/Oz.
Selection of the preferred alternatives
Converting the Price of Gold to the selected exchange rates and plotting their 3rd Grade Polynomial Trend Lines gives us the R2 coefficient as per Table 3 and it is showing that the values are not acceptable even for the CNY/Oz. Gold is not coming closer to the reference value of USD/Oz. Gold.
Table 3 : R2 coefficient Result for Price of Gold of Different Currencies
Comparing the trends for Gold Values in 4 different currencies, only 2 currencies are showing the same trend as the reference of USD/Oz. Gold yet not in the same gradient. Very surprising is to see the exponential increasing trend for the EUR / Oz. Gold (with also the worse R2 coefficient).
Performance Monitoring & Post Evaluation of Results
From the above calculation and above analysis, we can say that:
To make the common approach of the 3rd Order Polynomial Tend Line to all set of selected data may not be the right approach, since the results vary too much.
Using  to analyze the control charts giving the result that statistically all processes described in the graphs are pretty much under control. However if further investigation is made, the question of “Did the samples come from different parts of the process” will be answered by “Yes” and this may cause the different trends for the gold price with different currencies.
The currently increasing gold price is still not to be taken as reference, if it comes to multi currencies trade, since the different government policies to control their economy will supersede the gold market situation.
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