Perhaps the most elitist event of this past week was the World Economic Forum.  The glitzy event in the world-renowned ski resort town of Davos, Switzerland brings together leaders from around the world in business, economics, finance, and politics.  This year, attendees heard opinions on the future of happiness research, machine learning, artificial intelligence, data privacy, global labor markets, Chinese economic growth, economic conditions in Europe, trade, and a host of other thought-provoking topics.

Founding member Klaus Schwab addressed attendees, making a plug for his recent research into top technology, known as the fourth industrial revolution.  The theory posits that we’re now entering the fourth industrial revolution, with technological progress powering forward at exponential speed and the future more unpredictable than ever before.

Does Davos Matter?

With this background, one question everyone ought to ask themselves is this: Does Davos matter?  Does what happens at Davos actually influence financial markets? For example, does the annual gathering have any effect on the price of gold?

Here’s a look, in Figure 1, which shows the performance of the price of gold over the 4-day period of the World Economic Forum.

Before looking, would you guess gold performs well or poorly during the Davos meetings?

Fascinatingly, and perhaps disconcertingly, on average, gold gains 1.1% during Davos.  Gold declined in value in only 5 out of the 20 years shown in the figure.  Meaning, the probability of gold increasing over Davos was 75%.  Not a bad trade by stock market standards.

Total Gain/Decline by Year over the Entire World Economic Forum

Figure 1

So how does gold perform over the other 360 days of the year?

A comparison of gold’s performance during Davos with non-Davos days is in Figure 2.  Unsurprisingly given the finding in Figure 1, gold performs generally much better during Davos days than it does the rest of the year.  The difference is statistically significant as well.

On any given day, one might expect gold to return 0.03%, on average.  The return during the Davos meetings is 11 times better, at an average daily return of 0.33%.  Amazing.  What’s behind this?

Daily Gain/Decline in the Price of Gold During Davos/Non-Davos Days

Figure 2

Possible Explanations for the “Davos Days Effect”

What is causing the “Davos Days Effect”?

One possible explanation is that the World Economic Forum injects markets with a confidence that problems are being being addressed.  News surrounding the World Economic Forum is generally positive, which can have a calming effect on investors.  This contentment then shows up in demand for financial assets, including the world’s most well-known precious metal, gold.

An alternative view is that the World Economic Forum makes investors jittery, and when market participants become concerned about what policymakers might do, they shift their holdings to safe assets.  Gold is such an asset.  Topics that might cause investors worry include discussions of geopolitical tensions or trade, to name a few.


There’s no real, certain answer on what’s behind the “Davos Effect” on the price of gold, only speculation.  What analysts do know is that gold generally performs better during Davos days compared to non-Davos days.  Think about this the next time you’re moving assets around at the end of January 2020.