Nonlinear information transmission in gold markets: evidence from cross-recurrence quantification analysis (CRQA)

Abstract

The study examines whether the information transfer between speculative positions and real interest rates in the gold price formation process operates as a linear, time-independent, and unidirectional mechanism, or whether it exhibits a nonlinear structure sensitive to time and market regimes. In fact, if we consider real interest rates as the result of the public sector's impact on the market and gold option spreads as the result of the capital market's impact on the market, the study also seeks to answer the question of whether gold prices are driven by the public or private sector. To this end, the study analyzes the interaction between gold prices, speculative market positions, and real interest rates using Cross-Recurrence Quantification Analysis (CRQA) and windowed CRQA (W-CRQA) methods. These methods enable the identification of dynamic indicators, lags, and structural linkages that traditional linear causality and price formation approaches struggle to capture. The findings indicate that speculative positions play a statistically significant and deterministic leading indicator role on gold prices in the long term. This situation, identified with a lag of approximately ten months, suggests that speculative capital influences gold prices not only through short-term fluctuations but also through expectation formation and strategic positioning processes. In contrast, while the relationship between real interest rates and gold prices exhibits a higher level of determinism, public policies appear to respond to market dynamics in a lag and largely reactive manner. Furthermore, time-dependent analyses reveal that these relationships weaken during periods of crisis and uncertainty and temporarily dissolve in some sub-periods. These findings show that information transmission in the gold market is not a linear and static process; rather, it exhibits a complex structure that varies depending on the type of actor, time, and market conditions. The study provides an important methodological contribution by offering a non-linear and time-sensitive perspective on the literature on price determination and leadership in gold markets.