The Bank for International Settlements warns: Retail investors are pushing gold and US stocks into the "bubble zone"

The Bank for International Settlements (BIS) warns that retail investors are pushing gold from a traditional safe-haven asset to a speculative asset, with gold and the stock market both entering an "explosive zone" for the first time in at least 50 years.

On December 8, the BIS pointed out in its latest quarterly report that although the initial rise in gold prices may have been triggered by institutional investors seeking safe havens, the "chasing behavior" of retail investors has significantly amplified this trend. Since early September, gold prices have risen by about 20%, moving in tandem with high-risk assets, deviating from its historical safe-haven pattern.

Hyun Song Shin, head of the BIS's Monetary and Economic Department, stated: "Gold prices are rising alongside other risk assets, diverging from its historical pattern as a safe-haven asset. Gold has become more like a speculative asset."

The institution warns that after the "explosive phase" of a bubble, a sharp and rapid correction typically follows. Although the timeframe for such adjustments may be long and uncertain, the rare phenomenon of gold and the stock market being in this dangerous zone simultaneously warrants high vigilance from investors.

Retail "Chasing" Changes Gold's Nature

According to BIS's portfolio flow data, part of the current rise in gold prices is attributed to "trend-chasing investors" attempting to capitalize on the "media hype" surrounding gold. This retail-driven buying spree has fundamentally changed the trading pattern of gold.

With expectations of interest rate cuts driving up risk appetite, investor concerns about economic slowdown have eased. The BIS noted that this created conditions for retail funds to flood into the gold market, pushing this traditional safe-haven asset into the speculative realm.

In the stock market, the market has continued to rebound since hitting a low after Trump announced tariff policies in April. Technology stocks, particularly those related to artificial intelligence, have led the gains, but concerns about overextended valuations are growing.

The BIS emphasized that the past few quarters mark the first time in at least 50 years that gold and the stock market have simultaneously entered the so-called "explosive zone." The institution cited the case of the 1980 gold bubble burst, noting that after experiencing an explosive phase, bubbles typically accompany sharp and rapid adjustments.

However, the BIS also pointed out that the timeframe for market corrections is variable and may last a long time. This means that the current market pattern may persist for a while, but the risk of eventual correction remains.

It also emphasized that gold and the stock market entering the "explosive zone" simultaneously face higher systemic risks. If one of the markets experiences a correction, it could trigger a chain reaction affecting overall market stability.

Abnormal Signals in the Bond Market

After repeatedly warning about tight global fiscal budgets, the BIS also noted that several developed economies issued a "large amount" of debt between September and November.

The resulting oversupply of government bonds has led to a reversal of common spread relationships, prompting hedge funds to engage in relative value trading using interest rate swaps.

Hyun Song Shin stated:

"In the past, people believed that lending money to the government required paying an extra cost—that's the so-called convenience spread. But now the convenience spread no longer exists." This abnormal phenomenon indicates that even the government bond market, considered the safest, is facing structural pressures.

Analysis points out that these simultaneous market distortion signals—from the speculation in gold, overvaluation in the stock market, to anomalies in the treasury bond market—collectively constitute the BIS's concerns about the current stability of the global financial market