ARK Invest CEO Cathie Wood has stated that the likelihood of a decline in gold prices is increasing. Writing on X, Wood noted historical monetary indicators suggesting that gold may be at the end of a cycle.
Recent market data has fueled that argument. Intraday trading showed that gold’s market capitalization relative to the US money supply (M2) reached a historic extreme. The ratio exceeded levels last seen in 1980, when inflation was double-digit, and interest rates were high. More notably, it also surpassed readings linked to the Great Depression of 1934, when sweeping monetary disruption redefined the U.S. financial system.
Valuation signals a flash warning as dollar conditions shift
Wood emphasized that the current macro context is very different from that in other periods. The American economy is neither in a runaway inflation nor in a deflationary collapse. Meanwhile, financial situations have improved.
The 10-year U.S Treasury yield, which reached close to 5% at the end of 2023, has since dropped to approximately 4.2%. Against that backdrop, Wood maintained that the parabolic rise in gold prices does not appear to be related to fundamentals.
“The US economy today looks nothing like the double-digit inflation-prone 1970s or the deflationary bust of the 1930s. True, foreign central banks have been diversifying away from the dollar for years; yet, the 10-year Treasury bond yield peaked at 5% in late 2023 and is now 4.2%,” Wood wrote.
Wood also emphasized currency dynamics. Although foreign central banks are slowly moving away from the dollar, a renewed appreciation of the U.S. currency could put pressure on gold prices. She quoted the period from 1980 to 2000 when a stronger dollar was accompanied by a long-term decline in gold, wiping off over 60% of its value.
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. In our view, the bubble today is not in AI, but in gold. An upturn in the dollar could pop that bubble, a la 1980 to…
— Cathie Wood (@CathieDWood) January 30, 2026
The gold-to-M2 framework is not accepted by all market participants. Macro traders retaliated, saying M2 has since stopped being a stable reference point in a post-quantitative-easing, digitally integrated financial system.
Analysts dispute central bank buying narrative
Further skepticism has come from Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance, who was a chief FX strategist at Goldman Sachs. In a Substack post, Brooks debunked claims that central bank demand is driving gold prices higher.
He argued that many charts cited to support that narrative confuse price appreciation and actual buying. As the price of gold rises, the share of gold in central bank reserves rises automatically, even if reserves remain flat. Brooks said there have been no spikes in the volume of official-sector gold, according to International Monetary Fund data. He concluded that recent gains more closely reflect the traits of retail speculation than those of institutional accumulation.
During publication, gold spot prices in United States dollars were down 2.60% at $5,232.81 per ounce, down from a recent all-time high of $5,595.46. The pullback has reopened the debate on whether the rally is over.
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