BIS flags bubble-like conditions in gold, US equities

Retail investors are helping push gold and US stocks into bubble territory, raising the risk of a sharp reversal, the Bank for International Settlements’ (BIS) warns in its quarterly review. BIS pointed to signs of exuberance — including rapid price appreciation, elevated valuations, and media hype — with gold up 60% YTD, its strongest performance since 1979, and S&P 500 seeing annual gains of 17% while Nasdaq is up 22%.

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Institutional pulls back, retail all in: Retail investors accounted for most of the inflows into gold and US equity funds over the past three months, while institutional investors either pared back or held steady — a dynamic the BIS says could heighten volatility if herd behavior triggers fire sales.

A double whammy: This is the first time in at least five decades that equities and gold have hit bubble indicators simultaneously, the bank noted. While gold eased to USD 4.2k this week from an October record of USD 4.4k per oz, inflows into gold ETFs are set for a record year.

Central bank buying of gold — traditionally a safe haven — to hedge against a weak USD, inflation concerns, and debt worries have all given the rally a boost. The concern? Bullion has a history of boom-bust cycles when subsequent corrections erased gains by up to 30%.

On equities, the bank warned that big tech-led gains — fueled by AI enthusiasm — have pushed valuations to stretched levels, heightening the risk of a disorderly correction with broader market spillovers.

Still, Wall Street analysts expect the S&P 500 to extend its rally into 2026 and gain around 10%, with big tech leading gains despite concerns over high AI spending, the Financial Times reported elsewhere. Analysts cited supportive fiscal policy, potential Fed rate cuts, and gains from AI deployment.

We dove into why the AI hype may be masking underlying risks of an AI bubble recently, after skeptics warned the rally rests on short-lived GPU infrastructure and extended depreciation schedules, raising the risk that reported revenues overstate underlying economics. Investor Michael Burry has reportedly placed a USD 1.1 bn short against Nvidia and Palantir, a sign that a mass write-down could be incoming.

MARKETS THIS MORNING-

Asian markets are a sea of red this morning, as Chinese inflation rose to its highest since February. Hong Kong’s Hang Seng was down 0.6%, while China’s CSI 300 lost 0.8%. Over on Wall Street, futures are hovering near the flatline after US indices logged minor changes yesterday, with the S&P down marginally and the Nasdaq up 0.1%.

THE CLOSING BELL-

The EGX30 fell 0.1% at yesterday’s close on turnover of EGP 6.8 bn (30.8% above the 90-day average). Local investors were the sole net buyers. The index is up 41.0% YTD.

In the green: Beltone Holding (+4.1%), Raya Holding (+3.9%), and Qalaa Holdings (+2.9%).

In the red: Eastern Company (-6.0%), Orascom Construction (-1.9%), and Fawry (-1.0%).

CORPORATE ACTIONS-

Acrow Misr’s board approved the voluntary delisting of the company from the EGX, according to a disclosure (pdf) from the scaffolding and formwork provider. If given approval by the general assembly, shareholders who choose to exit after the company’s delisting will have their shares repurchased at EGP 129.29 each — higher than the EGP 100 per share maximum price it previously set to finance the buyout.