The present study applied data from the 1980s gold market to Sherman's model of gold prices that was tested on the 1970s gold market. Sherman's model produced excellent results for determining gold price movements in the 1970s market where prices consistently moved in a straight upward manner. The question of concern is whether the same predictive values can be achieved by applying the model to the 1980s market where prices were extremely volatile with many peaks and troughs. Six regressions were computed using different combinations of the following independent variables: real GNP, U.S. money supply, real Eurodollar rate, political tension index, U.S. dollar exchange rate, and world money supply. Each regression was carefully analyzed and hypotheses concerning market efficiency and the explanation of price movements by using the basic tools of economic analysis were supported.
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