They warn that retail investors would be driving a bubble in gold and stocks

The Bank of International Settlements (BIS), an entity that brings together the world’s central banks, warned about the simultaneous formation of a possible bubble in the gold market and in stocks.

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This phenomenon had not been observed in at least half a century, according to its most recent annual report and would have been driven, in part, by the massive entry of retail investors.

According to the BIS, for the first time in the last 50 years the price of gold and the S&P 500 index exhibit “explosive” behavior in parallel.

While stocks continue to be driven by the rise of artificial intelligence and technology companies, gold is up 60% so far this year, its biggest rise since 1979.

If the horizon is expanded, the precious metal has risen more than 150% since 2022, in a context marked by post-pandemic inflation, the war in Ukraine and sanctions against Russia.

Hyun Song Shin, chief economic advisor at the BIS, noted that gold’s performance has changed significantly.

“Gold has behaved very differently this year compared to its usual pattern. The interesting thing is that it has become much more of a speculative asset,” he said.

Traditionally, gold usually plays a safe haven role when stocks fall, but now both move in parallel, reducing its hedging function.

Among the signals that reinforce this alert, the BIS highlighted that gold exchange-traded funds (ETFs) have been trading at premiums to their net value, reflecting strong buying pressure and limitations on arbitrage.

Added to this is the growing participation of retail investors and sustained purchases of gold by central banks, which have contributed to supporting prices.

Concerns

The organization’s concern is twofold: what assets could serve as a refuge if both the stock market and gold suffered a simultaneous correction, and what implications would that scenario have for central banks that today maintain a high exposure to the metal.

The BIS also warned about the “increasing fragility” of the risk environment, amid doubts about valuations linked to artificial intelligence and after recent setbacks in cryptocurrencies such as bitcoin.

Although it recognizes that AI companies do generate profits today, unlike the dotcom bubble, the organization raises the central question of whether the magnitude of current investments will be sustainable in the long term.