A double bubble for gold and US equities

Exchanges, the Goldman Sachs podcast featuring exchanges on navigating macro uncertainty, exchanges on the forces shaping global markets. For the sharpest analysis on finance, business and the economy, count on exchanges between leading minds at Goldman Sachs. New episodes every week. Listen now.

Good morning from the Financial Times. Today is Tuesday, December 9th, and this is your FT News Briefing. The fight over Warner Brothers' discovery gets a reboot, and American natural gas is becoming super expensive. Plus, gold's amazing run has got some wondering whether it's entering bubble territory. Given how rapid these price increases have been, I think a lot of people are wondering if it's still really safe at these levels.

I'm Mark Filippino and here's the news you need to start your day.

Honestly, this fight between Netflix and Paramount might be better than anything that's on TV right now. Paramount made a $108 billion hostel all-cash bid for Warner Brothers Discovery yesterday. That's a bit awkward for Netflix, which sealed an $82.7 billion deal for Warner Brothers last week. Here's Paramount CEO David Ellison criticizing the Netflix deal on CNBC yesterday.

When you combine the number one streamer with the number three streamer that creates a company that has unprecedented market power. That's bad for Hollywood. That's bad for the creative community. That's bad for consumers. Paramount said some financing would come from several Middle East sovereign wealth funds as well as from U.S. President Donald Trump's son-in-law, Jared Kushner.

The president said on Sunday that the Netflix-Warner Brothers tie-up could be a real problem because of Netflix's very big market share. Netflix would need federal regulatory approval for the deal.

Paramount and Warner Brothers saw their share price shoot up yesterday. Netflix, however, ended the day down about 3.5%. US natural gas prices are soaring. The U.S. benchmark has hit its highest level since Russia's full-scale invasion of Ukraine back in 2022. That's because the U.S. is exporting record amounts of the fuel and it's adding to an affordability crisis that's been creating political problems for U.S.

President Donald Trump. Here to tell us more is the FT's U.S. Energy Editor, Jamie Smith. Hey, Jamie. Hi, Mark. So how is the surge in natural gas prices affecting everyday Americans? Yeah, what we've really seen in the last couple of weeks is this huge increase in the wholesale. gas prices across the USA. They're up over 50% this time last year, and they breached the $5 mark, which is the first time since 2022.

We're getting this big increase in the wholesale rate, and that is putting pressure on retail rates, particularly for electric power utilities, which generate electricity by burning natural gas. And then they will... pass on some of that onto residential customers. They will be protected to some extent because they get their gas from regulated utilities generally. And so...

The increases there will be a lot less in terms of the gas price. But even there, when we look at the statistics in the 12 months to the end of September, there was an 11.7% increase. in piped gas into people's homes. And why is this happening? Does it have anything to do with the fact that I'm wearing a jacket over my sweater right now? Exactly. You know, there's really two reasons for this big jump.

in wholesale gas prices. The first reason we've had an unusually cold spell recently, and this means demand for gas for home heating from consumers and businesses is rising very fast. But there's also this other issue, and that really relates to the huge amounts of US natural gas that are being exported overseas as part of the country's liquefied natural gas boom. which many analysts believe is also at play.

And they're saying this could be causing a structural change in gas pricing in the US market. In the year until the end of September, we've seen about a 20% increase in the volume of LNG exported overseas. And over the next five years, there are plans to double the amount. So it's quite an interesting conundrum there. What do Trump and natural gas companies have to say about all this?

Natural gas companies do not agree with this thesis that booming LNG exports are causing a big increase in US natural gas prices. They say that it's not a factor of exporting the gas overseas. They say there is an issue with an infrastructure problem in the United States, a lack of pipelines and storage facilities.

in certain areas, and this can cause temporary fluctuations in price. They say this is a political problem because they need new permitting rules to build more pipelines so that they can... get the gas to the right locations so that the prices don't increase. Now, Jamie, what is this doing to Trump politically? Anything? So in terms of the politics of this, this increase... in utility bills, both gas and electricity is a big weakness for Trump if it continues. So...

Voters, for example, in opinion polls, which were taken in November, showed that by a margin of two to one, Americans said Trump had done little to bring about lower prices. It's a big political issue. In the recent New Jersey election, utility bills were a big factor, which helped the Democratic candidate, Mikey Sherrill, get elected.

When Trump's been asked about affordability, he's sort of blown hot and cold on this. So we're not really sure where the Trump administration is going to move ahead and tackle this. With the FT's Jamie Smith in New York. Thanks, Jamie.

Thanks, Mark. The US is going to allow NVIDIA to send its advanced H200 chips to China. President Trump made the announcement on social media yesterday and he said the chips would be sent under conditions that, quote, allow for continued national security. Now, this is good news for China, and NVIDIA probably doesn't hate it either. The company's share price rose in after-hours trading following Trump's post. But the U.S. Congress might not be a fan.

Last week, senators introduced a bipartisan bill to try and make it harder for China to get American technology for artificial intelligence. The bill would prevent NVIDIA from selling the H200 and its Blackwell models to China.

And on top of all that, Chinese authorities might also hamper the chip imports. Both gold and U.S. stocks are heading to bubble territory. That's what a Bank for International Settlements report warned yesterday. And there's one group in particular the BIS is pointing its finger at. The FT's Leslie Hook is here to tell us more. Hi, Leslie. Hi, Mark.

So tell us a little bit more about what this report says. What is the BIS seeing in these markets that shows that they're entering bubble territory? Well, the BIS is the bank to the central banks. So it's... usually quite a conservative institution. It's handling central banks' assets and advising them on their investments. And so it's quite unusual to hear it come out with such a strong statement that and U.S. equities might be entering bubble territory.

One reason why it says this is that prices have risen a lot this year. Gold is up 60%, the S&P 500 is up 17%, and NASDAQ is up 22% this year. And the second characteristic that the BIS picked up on in an report is that both these asset classes have been marked by a retail frenzy. Yeah. What role have retail investors played in this trend that we're talking about?

Well, that's a really interesting question because we've seen retail investors pour into the gold market, particularly in the last... three months or so. Earlier in the year, we saw more central bank buying, more institutional investors, and this retail interest has kind of... you know, supercharged gold prices from about September onwards. Now, the BIS...

sees this retail involvement as being potentially risky for the market. And its report says, quote unquote, that retail investors have a propensity to engage in herd-like behavior, amplifying... price gyrations should fire sales occur. So it's identifying this retail involvement as one indication that we could be in a bubble. How significant is it that both equities and gold are forming bubbles at the same time?

Well, it's quite unusual. The BIS points out that this is the first time in 50 years that both these asset classes have exhibited this type of behavior at the same time. Typically, gold is seen as a safe haven asset. So when you're in a high-risk environment, you might sell your equities and buy gold. But that's not what's been happening this year. Yeah, it's really strange behavior from the market. What does this all mean for gold next year? Well, I think that's the question on everyone's mind.

Gold has had an amazing year. This has been a historic rally by pretty much any measure. We saw gold prices peak at $4,381 in October. And it's been gold's best year since 1979. But I think the question in everyone's mind now is, what will the market feel like when we come back from the holidays in January? Will asset managers have to rebalance their portfolios and sell some gold? Will we see a change of sentiment?

could lead to the quote-unquote fire sale referred to in the BIS report. I mean, gold has long been viewed as a safe haven asset, but given how rapid these price increases have been, I think... A lot of people are wondering if it's still really safe at these levels. Leslie Hook is the FT's Natural Resources Editor. Thanks, Leslie. Thanks, Mark.

You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT news briefing. Check back tomorrow for the latest business news. 8 out of 10 tech dollars in banking go to life support. Not innovation, not growth, just keeping the lights on. ThoughtWorks and AWS help banks switch the power back to progress. Modernizing legacy systems at pace without pulling the plug. Who drives the world forward?

The one with the answers or the one asking the right questions. At Aramco, we start every day by asking how. How can innovation help deliver reliable energy to the world? To get to the answer, we first need to ask the right question. Search Aramco Powered by Howe. aramco is an energy and chemicals company with oil and gas production as its primary business