International Clearing House: Retail speculative purchases push gold into a “bubble zone”

The Zhitong Finance App learned that the Bank for International Settlements (BIS) said in its quarterly market development report on Monday that retail investors have driven the recent rise in gold prices, breaking away from the traditional safe-haven asset model and becoming a more speculative asset. Although the rally may have begun when institutional traders are suspicious about overvaluing stocks, the Bank for International Settlements notes that there is evidence that retail investors are trying to profit from it, thereby amplifying this rise, which has prompted the safe-haven model to deviate from normal.

Hyun Song Shin, head of the currency and economy department at the Bank for International Settlements, said, “The price of gold has risen along with other risky assets, deviating from the historical pattern of being a safe-haven asset. Gold has become more speculative.”

The Bank for International Settlements said that the past few quarters were the first time in at least 50 years that gold and stocks entered the “explosive field” at the same time. The Bank for International Settlements wrote, “After experiencing a phase of explosive growth, the bubble usually bursts with sharp and rapid adjustments.” Using the 1980 gold market as an example, the bank notes that adjustments may also occur over a period of varying length and possibly a long period of time.

Peter Grant, senior metals strategist at Zaner Metals, said in a report: “The market is awaiting decisions from the Federal Reserve and more policy guidance.” He also added that since fundamentals are still strong and the central bank is still buying gold, gold is still attractive, and the price of gold is expected to break through $5,000 per ounce in the first quarter of next year.

Due to rising bond yields, gold and silver futures prices fell on Monday. The market already has a basic price that the Federal Reserve will cut interest rates this week. At the same time, it will pay attention to Powell's speech to get clues about next year's monetary policy. Gold futures for December delivery on the New York Mercantile Exchange closed down 0.6% to $4187.20 per ounce, ending three consecutive trading days of gains; silver futures for December delivery on the New York Mercantile Exchange closed down 1.1% to $57.779 per ounce, the fourth decline in five trading days.