The gold price in times of crisis
Abstract
© 2014 Elsevier Inc..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.
Cite as
Białkowski, J., Bohl, M., Stephan, P., & Wisniewski, T. (2015). The gold price in times of crisis. International Review of Financial Analysis, 41, 339.Details
Publication type
Research article (journal)
Peer reviewed
Yes
Publication status
Published
Year
2015
Journal
International Review of Financial Analysis
Volume
41
Start page
339
Language
English
ISSN
10575219
DOI