Gold and technology stocks are both experiencing rallies simultaneously, a phenomenon that deviates from historical patterns and raises concerns according to the Bank for International Settlements (BIS).
In its final report of 2025, the BIS noted this is the first time in fifty years that these two distinct asset classes have risen in tandem. The BIS suggests this convergence indicates a potential underlying issue, and if both assets were to decline concurrently, investors would face significant challenges finding safe havens.
Gold has seen a substantial increase of 60% this year, marking its most significant annual performance since 1979. Concurrently, equity markets, particularly those influenced by artificial intelligence, have surged, pushing the S&P 500 into what the BIS described as "explosive behavior."
Hyun Song Shin, the BIS's chief economic adviser and head of its monetary and economic department, commented on gold's altered behavior this year, stating that it has moved beyond its traditional role as a safe-haven asset and is now behaving more like a speculative investment.
This shift in gold's market dynamic contributes to the current instability. The BIS, often referred to as the central bank for central banks, has previously cautioned about market bubbles. However, its current concern centers on the implications of a simultaneous downturn in both gold and stock markets.
Shin posed the critical question: "Where would investors shelter if stocks and gold both crash?" The lack of a clear answer is a source of anxiety for policymakers and reserve managers, many of whom have recently increased their holdings in gold. A significant decline in gold prices alongside equities would eliminate their primary safety net.
BIS Highlights Role of Retail Buyers and ETF Pricing Pressure
The current rally is not solely driven by central banks or institutional investors; retail investors are also participating significantly. This year, the prices of gold Exchange Traded Funds (ETFs) have consistently traded above their net asset value. Shin characterized this as "strong buying pressure coupled with impediments to arbitrage," indicating that buyers are willing to pay a premium, a potential sign of market froth.
Central banks have engaged in substantial gold purchases over recent quarters, which Shin believes "clearly set a very firm tone in the price of gold." Once prices began to climb, other investors followed suit, with Shin observing, "Whenever you have prices actually doing quite well, you will see other investors jumping in."
The broader market environment, according to the BIS, is becoming increasingly fragile, extending beyond gold and stocks. Bitcoin has experienced a decline of approximately 20% in the past month, leading the BIS to warn that the market's appetite for risk may be approaching its limit.
The European Central Bank and the Bank of England have also expressed concerns regarding the inflated valuations of AI stocks in recent weeks, specifically noting that these valuations are based on overly optimistic assumptions.
BIS Questions AI Profits and Watches Dollar Drop
Shin drew parallels between the current market conditions and the dot-com bubble of the early 2000s. He differentiated the current situation by noting that today's AI firms are generating revenue. However, he questioned the long-term viability of their extensive infrastructure investments.
Many technology companies are investing billions in data centers, and Shin emphasized the importance of assessing whether these expenditures will prove justifiable in the long run. "The fundamental question is whether those expenditures will be seen as being justified in the long run," he stated.
Shin also indicated that the strength of global markets heading into 2026 will be significantly influenced by the overall economic performance. Currently, economic activity has shown resilience, with Shin noting, "So far, activity has been surprisingly resilient."
The BIS is also closely monitoring currency markets, with particular attention on the U.S. dollar. Following the announcement of broad new trade tariffs by Donald Trump in April, the dollar experienced a decline.
The dollar is now on track for its largest annual decrease since the collapse of Lehman Brothers in 2007. Shin observed that the dollar has remained relatively stable since that period but acknowledged that other factors are now coming into play.
"I think the hedging behavior of non-U.S. investors is going to be a very, very important input into how markets will co-move from here," Shin concluded.