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, Commerzbank's commodity analyst Carsten Fritsch notes.

Gold rally driven by institutional and retail buying

"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. However, we see significant differences here. At that time, the decline in the price of Gold was triggered by a massive increase in US key interest rates, which is not expected this time around. Rather, the Fed is likely to lower interest rates further tomorrow and in the coming year."

"It is also noteworthy that CFTC data on market positioning does not indicate any significant speculative influence on the rise in Gold prices to record levels in October. According to this data, speculative net long positions at the end of October were even lower than at the beginning of September. We therefore consider the risk of a sharp price correction to be low. Due to the US government shutdown in October, no more recent data on market positioning is available yet."