Central Bankers’ Bank Warns of a Gold Bubble Risk
Central Bankers’ Bank Warns of a Gold Bubble Risk
The Bank for International Settlements (BIS), based in Basel and representing 63 central banks, has issued a warning on the latest surge in gold prices. According to the institution, retail investors have played a major role in driving the recent rally, turning bullion from a traditional safe haven into a more speculative asset.
Retail investors behind the latest rally
Although gold prices have moved cautiously ahead of the Federal Reserve’s upcoming rate decision, they are still up around 20% since September. The BIS argues that part of this move has been fueled by “exaggerated narratives about gold” and heightened media and social media attention, which have attracted more individual investors into the market.
In its latest quarterly market report, BIS Monetary and Economic Department head Hyun Song Shin noted that gold has recently been rising alongside other risk assets, rather than behaving like a traditional safe-haven instrument.
From safe haven to speculative asset
Shin stressed that gold has become “a much more speculative asset,” highlighting that expectations of interest rate cuts have boosted risk appetite and eased concerns about economic slowdown, thereby changing the way gold is priced.
“Gold and equities have entered explosive territory”
The report underlines that the latest quarter is the only period in more than 50 years where both gold and equities have simultaneously entered what it calls “explosive territory.” The BIS warns that such phases are often followed by “sharp and rapid corrections.”
Recalling the gold episode of 1980, the report notes that not every correction unfolds in exactly the same way, and that some adjustments may stretch out over longer periods and occur in a more gradual fashion.
