Will precious metals shine? A market efficiency perspective

Precious metals (gold, silver, and platinum) have become an important part of investment portfolios for individuals as well as for institutions. This paper examines the weak-form efficiency of precious metal markets, using the automatic portmanteau and variance ratio tests. It is found that return predictability of these markets has been changing over time, depending on the prevailing economic and political conditions. The return predictability of gold and silver markets has been showing downward trends, implying that the degree of the weak-form efficiency of these markets has been gradually improving. In particular, the gold market has been highly efficient recently, showing the highest degree of market efficiency among the three precious metal markets.