BIS says gold and equities are in bubble territory

While gold and the S&P 500 have “breached the explosive behaviour” through the years, the authors of the report — Giulio Cornelli, Marco Jacopo Lombardi, and Andreas Schrimpf — said this is the first time in 50 years that the two assets have reached extreme valuations at the same time.

The bubble analysis comes as the S&P 500 is up more than 16% so far this year, with the index trading around 6,850 points; meanwhile, gold is seeing its best annual gains since 1979 and is up more than 50% year-to-date, trading around $4,200 an ounce.

This year, the S&P 500 has hit more than 20 record highs; meanwhile, gold has posted nearly 50 record highs as prices pushed above $4,000 an ounce.

Not only are the two asset classes trading near record valuations, but the drivers behind this year's rally are similar and indicative of bubble-market conditions. The analysts said that, according to fund-flow data, it has been mostly retail investors who have been pouring money into U.S. equities and gold funds.

“A typical symptom of a developing bubble is the growing influence of retail investors trying to chase price trends. At times of media hype and surging prices, retail investors can be lured to riskier assets that they would normally shun, compounded by herd-like behaviour, social interactions and fear of missing out,” the analysts said. “This time around, there is also evidence that retail investor exuberance and appetite for seemingly easy capital gains have spilled over to a traditional safe haven such as gold. Since the beginning of 2025, gold exchange-traded fund (ETF) prices have been consistently trading at a premium relative to their net asset value (NAV) amid growing retail investor interest.”

The analysts also note that retail demand has been at odds with institutional investment flows, which could create some volatility down the road.

“Retail investors have increasingly taken trading positions that run counter to those of their institutional counterparts: the latter were taking money out of U.S. equities or maintaining flat positions in gold, while retail investors recorded inflows,” the analysts said. “Although the influx of retail investors has mitigated the impact of institutional investor outflows, their growing prominence could threaten market stability down the road, given their propensity to engage in herd-like behaviour, amplifying price gyrations should fire sales occur.”

Although analysts have said that gold’s push to October’s record high above $4,360 an ounce pushed the market into overbought territory, few have seen signs of a bubble.

Although gold prices are building solid support above $4,000 an ounce, analysts have said robust fundamentals support higher prices, including ongoing central bank demand as the official sector further diversifies away from the U.S. dollar.

This year, central banks are expected to buy around 900 tonnes of gold, which would be down from the 1,000-tonne pace set in the last three years; however, demand remains well above long-term averages.

At the same time, analysts have said that further easing from the Federal Reserve through 2026 will drive investment demand. Falling interest rates are expected to push bond yields lower and weaken the U.S. dollar, removing two major headwinds from the marketplace.

Some analysts have also said that higher equity-market valuations should support higher gold prices as investors balance their portfolio risks.