The shine of precious metals around the global financial crisis

Isabel Figuerola-Ferretti, J. Roderick McCrorie

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    16 Citations (Scopus)
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    Abstract

    We analyze the price behavior of the main precious metals – gold, silver, platinum and palladium – before, during and in the aftermath of the 2007–08 financial crisis. Using the mildly explosive/multiple bubble technology developed by Phillips, Shi and Yu (2015, International Economic Review 56(4), 1043–1133), we find significant, short periods of mildly explosive behavior in the spot and futures prices of all four metals. Fewer periods are detected using exchange-rate adjusted prices, and almost none when deflated prices are used. We assess whether these findings are indicative of bubble behavior. Convenience yield is shown to have little efficacy in this regard, while other fundamental proxy variables and position data offer only very limited evidence against prices having been anything other than fundamentals-driven. Possible exceptions are in gold in the run-up to the highpoint of the financial crisis, and in silver and palladium around the launch of specific financial products. Some froth, however, is reported and discussed for each metal.
    Original languageEnglish
    Pages (from-to)717-738
    Number of pages22
    JournalJournal of Empirical Finance
    Volume38
    Issue numberPart B
    Early online date8 Mar 2016
    DOIs
    Publication statusPublished - Sept 2016

    Keywords

    • Commodities
    • Precious metals
    • Fundamentals
    • Economic bubbles
    • Mildly explosive processes
    • Generalized sup ADF test

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