Not All Bubbles Are Alike: Crash Risk and Speculative Regimes in Precious Metals

ABSTRACT We examine the economic consequences of speculative bubble regimes in precious metals markets. Using daily prices for gold, silver, platinum and palladium over 1990–2025, we first identify bubble episodes with recursive right‐tailed unit root tests and subsequently quantify post‐peak losses using forward‐looking maximum drawdowns. We then assess whether bubble persistence predicts crash severity and whether bubble states contain information about the probability of extreme downside events. Our results show that bubble duration is not systematically associated with the magnitude of subsequent losses, suggesting that longer‐lasting speculative episodes do not necessarily end in deeper corrections. However, substantial heterogeneity emerges across metals in the frequency of severe crashes. Most importantly, conditional probability estimates and logistic regressions indicate that severe drawdowns are significantly more likely during bubble regimes than during normal periods. Being in a bubble state increases the odds of a hard crash by approximately 70%, with particularly strong effects observed for silver and platinum. These findings imply that the primary risk signal lies in the presence of a bubble regime rather than in its persistence. Bubble indicators therefore provide economically meaningful early warnings of tail risk, with direct implications for risk management and portfolio allocation in commodity markets.