Speculative trading in the gold market

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. (C) 2015 Elsevier Inc. All rights reserved.