Forecasting Gold Prices in Iraq Using the MARIMAX Model in the Presence of Multicollinearity

Abstract

Gold prices are important financial and economic indicators that reflect changes in the economic environment, owing to their direct relationship with Iraq’s financial market and their relevance to everyday economic life. Gold prices may also be influenced over time by several external factors. Accordingly, this study aims to forecast weekly average gold prices using a MARIMAX model with two exogenous variables: the weekly average Iraqi dinar exchange rate and the weekly average price of Basra crude oil. MARIMAX(1,2,2) was identified as the most appropriate specification. Cross-correlation analysis of the time series indicated positive lagged effects of Basra crude oil prices and the exchange rate beginning at a one-week lag. Forecasts for the subsequent 16 weeks, based on the MARIMAX(1,2,2) model, indicate a limited but gradual upward trend in gold prices relative to the values observed during the study period from 9 May 2025 to 7 August 2026. The average forecast gold price is approximately IQD 982 thousand per mithqal.