The gold price in times of crisis
Martin T. Bohl,
Patrick M. Stephan and
Tomasz P. Wisniewski
International Review of Financial Analysis, 2015, vol. 41, issue C, 329-339
Motivated by the recent gold price boom, this paper examines whether an asset bubble exists in the gold market. We approximate gold's fundamental value using several econometric models and apply a Markov regime-switching Augmented Dickey–Fuller (ADF) test which has substantial power for detecting explosive behavior. Although our results are sensitive to the specification of the fundamental value, we show that a model accounting for the current European sovereign debt crisis accurately tracks the gold price observed in the market. We also note that inflation in a general commodity price index and gold ETF demand have a potential to explain the price trajectory.
Keywords: Gold price; Speculative bubble; Markov regime-switching ADF test; Global financial crisis; European sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G18 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:41:y:2015:i:c:p:329-339
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