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Is gold in the process of a bubble formation? New evidence from the ex-post global financial crisis period

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  • Grobys, Klaus

Abstract

In the prices of financial assets, super-exponential growth is not sustainable and will eventually result in what physicists term a “finite-time singularity,” suggesting an abrupt transition into a new regime—which often manifests itself in a crash. The financial literature on gold has documented that the dynamics constituting the supply-and-demand relationship in the market for gold has undergone substantial changes since the early 2000s. In particular, the global financial crisis might have had an unprecedented effect on the demand for gold as a financial asset. This is the first paper exploring whether gold is in the process of a bubble formation that started in the ex-post financial crisis period. Calibrating the log-periodic power law (LPPLS) model to the log-prices of gold futures using daily data covering the period December 2015—June 2024, this study finds strong evidence for a bubble formation predicted to last until 2029. Various robustness checks provide further evidence that the LPPLS model is a remarkable tool for predicting bubble formations in the market for gold.

Suggested Citation

  • Grobys, Klaus, 2025. "Is gold in the process of a bubble formation? New evidence from the ex-post global financial crisis period," Research in International Business and Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531924005208
    DOI: 10.1016/j.ribaf.2024.102727
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    More about this item

    Keywords

    Bubble; Gold; Finite-time singularity; Log-periodic power laws; Singularity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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