See https://en.wikipedia.org/w/index.php?title=User:Okeyes_%28WMF%29/sandbox&diff=next&oldid=563541289 for example; It should be [[''death'' metal]].
Is this still happening?
In my sandbox just now, VE changed [[Ancient Carthage]] to [[Ancient Carthage|''Ancient'' Carthage]] as I would expect.
With the sole exception of plaint text followed by italic text, it seems that a separate link is created for each part of the link that has a different bold/italic status:
Expected behaviour: One link is created, e.g. [[link|''one'' two]]
Actual behaviour: Two links are created, e.g. [[link|''one''']] [[link|two]]