ARK Invest founder and CEO Cathie Wood has presented a contrarian perspective on financial markets, asserting that gold, rather than artificial intelligence (AI), is displaying indications of a bubble. Her analysis relies on historical valuation metrics, macroeconomic factors, and the trajectory of the US dollar.
Gold's Warning Signals and Historical Context
In a social media post on X on January 30, just hours before gold prices experienced their most significant intraday decline since the early 1980s—crashing 12% to below the $5,000 level—Wood suggested that the likelihood of gold prices approaching a peak is increasing. She highlighted a critical warning signal: gold's market capitalisation as a percentage of the US money supply (M2) has recently reached an all-time high.
This ratio has now exceeded its 1980 peak, a period characterized by rampant inflation and interest rates soaring into the mid-teens. More strikingly, Wood noted that the gold-to-M2 ratio achieved similar levels during the Great Depression in 1934, an era marked by severe economic distress. During that crisis, the US government devalued the dollar against gold by nearly 70% in January 1934, prohibited private gold ownership, and witnessed a collapse in the money supply.
Contrasting Economic Environments
Wood emphasized that the current US economy bears little resemblance to the inflation-prone 1970s or the deflationary bust of the 1930s. While acknowledging that foreign central banks have been gradually diversifying away from the US dollar for years, she pointed to a World Gold Council report for Q4 2025, which shows that central bank gold purchases remain historically elevated and geographically widespread, though they have slowed from recent rates.
Additionally, Wood observed that despite ongoing gold buying, the bond market has remained stable. She cited the 10-year Treasury bond yield, which peaked at 5% in late 2023 and is now at 4.2%, indicating that financial conditions are far from crisis levels.
Parabolic Moves and Trend Reversals
Wood further cautioned that parabolic asset movements and "out-of-this-world spikes" in asset prices often signal an impending trend reversal. In her social media post, she stated, "While parabolic moves often take asset prices higher than most investors would think possible, the out-of-this-world spikes tend to occur at the end of a cycle."
Consequently, she concluded that the bubble today is not in AI but in gold. Gold appears particularly vulnerable if the US dollar strengthens, drawing a historical parallel to the period between 1980 and 2000, when a rising dollar coincided with a more than 60% decline in gold prices.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.
