According to a report by the Bank for International Settlements (BIS), the rise in gold prices since the beginning of September has been amplified by speculative purchases by retail investors, thereby decoupling gold from typical patterns of behavior such as that of a safe haven. 

Instead, the rise in the price of gold has been in line with risky asset classes such as equities. Initially, institutional investors bought gold because of what perceived as excessively high stock market valuations. Retail investors then jumped on the bandwagon, turning gold itself into a speculative investment. The BIS refers to the strong buying interest in gold ETFs. 

According to the BIS report, gold and equities have shown “explosive behavior” in recent quarters simultaneously, which has not occurred in the last 50 years. The report therefore warns of a sharp and rapid correction and draws a comparison with 1980. 

An aspect to bear in mind is that it is also unlikely central banks will increase their gold reserves indefinitely. After all, the purpose of reserves is to secure foreign trade, i.e., to provide importers with sufficient foreign currency to pay for their goods. This is hardly possible with gold, however. 

The precious metal serves primarily as a store of value and is converted into foreign currency as soon as it is needed as a means of payment. At least large buyers such as the People's Bank of China (PBoC) have recently curtailed their gold purchases, probably also because the already high price is becoming increasingly deterrent.

Equally important, the physical demand for gold and jewelry in key markets has slowed markedly because of high prices.