Feedback trading in retail-dominated assets: Evidence from the gold bullion coin market

Although investors' behaviour in gold investments has been widely researched, no study to date has investigated it in the gold bullion coin market, despite the fact that the latter is dominated by retail investors, who are traditionally prone to noise trading. We present seminal empirical evidence on this issue by examining feedback trading in the Krugerrand's secondary market on the Johannesburg Stock Exchange for the March 1996 – August 2019 period. We also assess whether feedback trading interacts with variables relevant to the coin's valuation and the impact of the global financial crisis over those interactions. Positive feedback trading is present for the full sample period, before and during the crisis, interacting significantly with a variety of factors related to Krugerrand's pricing, yet dissipates post crisis, likely due to enhanced foreign demand that catapulted the coin's value, rendering it less easy to trade for South African retail investors. The above imply that Krugerrand-investors should be focusing less on historical price trends and devote more attention to the coin's global demand instead.