The gold price in times of crisis

Jędrzej Białkowski, Martin T. Bohl, Patrick M. Stephan and Tomasz P. Wisniewski

International Review of Financial Analysis, 2015, vol. 41, issue C, 329-339

Abstract: 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)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:41:y:2015:i:c:p:329-339

DOI: 10.1016/j.irfa.2014.07.001

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