Speculative trading in the gold market

Dirk G. Baur and Kristoffer Glover

International Review of Financial Analysis, 2015, vol. 39, issue C, 63-71

Abstract: In this paper we use a recently developed econometric test to identify bubble-like price behaviour in the gold market. We find that the price of gold followed an explosive price process between 2002 and 2012 and exhibited super-exponential growth between 2002 and 2008, indicating excessive speculative trading and exuberance in the gold market. We also provide a theoretical foundation for such bubble tests based on a behavioural model in which chartists can cause episodes of explosive price dynamics.The identification strategy yields economically intuitive results and is a simple alternative to using more complex estimation techniques commonly used in the heterogeneous agents literature.

Keywords: Speculation; Gold; Bubble; Heterogeneous agents; Chartists; Explosive process (search for similar items in EconPapers)
JEL-codes: C22 C51 G02 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:39:y:2015:i:c:p:63-71

DOI: 10.1016/j.irfa.2015.02.004

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