Impacts of Search Volume on Trading Behavior in Gold-family Investments

Abstract

Search engines benefit individuals with advantage of mass information. We use the search volume index in Google Trends to reveal investor sentiment in gold trading market. The effects of search volume on different modes of gold-based investment and different types of traders were examined using two samples covering upward trends and downward trends. We find that the abnormal search volume index is positive with contemporaneous gold ETF returns, but has little relation with contemporaneous gold futures returns. Moreover, the effects of sentiment on gold price movements depends on market conditions (bull versus bear market). We also find that non-commercial gold futures traders are more sensitive to sentiment revealed by search volume. Overall, we provide a new set of results on the prediction ability of investor attention on gold trading.