Something is happening in markets that hasn’t been seen in at least 50 years and it’s raised the antenna of the oldest global financial institution in the world.

The Bank for International Settlements, known as the bank for central banks, warned this week that stocks and

gold prices soaring at the same time is highly unusual and raises concerns that not just one, but both assets could be in a bubble.

“Such strong performance sits oddly with precious metals’ traditional role as safe haven assets. This should make them unattractive in a risk-on environment, in which other assets promise much higher returns,” said the

BIS in its quarterly review this week. Bubbles are identified by rapid and accelerating price surges, said the BIS, which it terms “explosive behaviour,” followed by sharp corrections.

Though difficult to call, statistical tests used to detect “explosiveness” in price action suggest that both the

SP 500 and the price of gold have entered this territory in recent months.

Historically, stocks and gold reach this threshold at different times. The bank notes that gold crashed in 1980 after its bubble during the Great Inflation. Years later in the early 2000s, stocks plunged when the dot-com bubble burst.

“The past few quarters represent the only time in at least the last 50 years in which gold and equities have entered this territory simultaneously,” it said.

A bubble in both stocks and gold could prove problematic as the yellow metal has traditionally served as a haven for investors to fall back to when equity markets got rocky.

This time, the BIS warns, it is retail investors who are helping to drive up the price.

There is “evidence that retail investor exuberance and appetite for seemingly easy capital gains have spilled over to a traditional safe haven such as gold,” it said.

Gold has soared 60 per cent this year, its best performance since 1979, even with a correction that pulled it back from US$$4,380 an ounce in late October. (It was trading at US$4,231.10 this morning). The S&P is up 17 per cent, and the Nasdaq 22 per cent, driven by the

artificial intelligence boom . Recent fund flow data show it is mostly retail investors who are pouring their money into U.S. equities and gold now, running counter to institutional investors which are taking money out of stocks and staying flat in gold.

Flows into retail ETFs and mutual funds tracking gold rebounded in June and gained ground in September.

The “herd-like behaviour” of retail investors threatens market stability by “amplifying price gyrations should fire sales occur,”  said the BIS.

Once an asset bubble bursts, the sharp and swift correction is followed by a period of negative or subdued returns.

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Canada has widened its world of trade away from the United States since President Donald Trump started to impose tariffs. Excluding gold shipments, exports have increased to 27 partners by $6.6 billion, with the biggest swings to China, Denmark, Hong Kong, the Netherlands and Singapore,

said TD Economics . Oil exports are responsible for about 35 per cent of the gain to other foreign markets.

It’s not enough to offset the decline in exports to the U.S. which have fallen by $15 billion, but “it’s helped cushion the blow,” said TD chief economist Beata Caranci.

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The Canada Revenue Agency (CRA) is warning that Canadians could unknowingly participate in an “aggressive” tax scheme and face serious consequences, including penalties, court fines and even jail time.

The scheme involves critical illness insurance arrangements that may be designed to avoid paying taxes through often complex transactions.

Find out more Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on  one of the country’s most important sectors.

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McLister on mortgages

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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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