BIS Issues First Alert in 50 Years Over Global ‘Double Bubble’ Risk in Gold and Stocks

 

The central bank of central banks warns synchronised surge in gold and S&P 500—fuelled by AI hype and geopolitical tension—reflects dangerous market fragility.

 

The Bank for International Settlements (BIS) has sounded the alarm over an unprecedented "double bubble" risk, noting that the prices of both gold and global stocks have surged simultaneously for the first time in at least 50 years.

 

The rare warning from the BIS, often referred to as the central bank of central banks, questions the resilience of the current "risk-on" environment across global financial markets.

 

While the stock market has been propelled by the hype surrounding Artificial Intelligence (AI) technology, gold prices have soared by 60% this year, putting 2025 on track to be the metal’s biggest annual price leap since 1979.

 

 

 

Gold's New Role

The synchronised surge has forced a re-evaluation of gold’s traditional role as a safe-haven asset.

 

“Gold has behaved very differently this year from its normal pattern. It is clear that gold is increasingly taking on the characteristics of a ‘speculative asset,’” stated Hyun Song Shin, Economic Adviser and Head of Research at the BIS, in the institution's final annual report.

 

The fundamental concern for the BIS lies in the synchronisation: if both markets were to suffer a correction simultaneously, investors would have few places to seek refuge. 

 

This scenario also raises questions about the impact on central banks and global reserve managers who have been aggressively adding gold to their reserves.
 

 

 

Market Fragility and AI Hype

BIS analysis confirms that this is the first time in at least five decades that gold and the S&P 500 index have risen so sharply together.

 

Gold’s price increase of over 150% since 2022 is tied to high inflation post-COVID and heightened geopolitical tensions from the Russia-Ukraine war.

 

Further signs of a bubble include strong retail investor speculation, evidenced by Gold ETFs consistently trading at a high premium to their Net Asset Value (NAV). 

 

The BIS executive added that aggressive central bank purchasing has "created a very strong price floor," encouraging other investors to pile into the market.

 

The BIS warns of increased market fragility, citing concerns over the high valuation of AI stocks and the recent 20% dip in the price of Bitcoin. 

 

Other major institutions, including the European Central Bank (ECB) and the Bank of England (BOE), have also recently cautioned over the AI bubble risk, fearing a rapid and severe correction if corporate expectations are unmet.

 

The BIS differentiated the current risk from the 2000 dot-com bust, noting that contemporary AI technology companies are generally profitable, unlike many firms during the dot-com bubble. 
 

 

However, Shin stressed that the key uncertainty remains whether the current massive capital investment in AI will prove worthwhile in the long term, coupled with how well the global economy performs next year.

 

The BIS is also monitoring the US dollar, which, despite being on track for its biggest annual decline since 2007, has stabilised since President Donald Trump announced broad customs tariffs in April.

 

The hedging behaviour of foreign investors is flagged as a key factor for future market direction.