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Cathie Wood warns gold bubble as M2 ratio spikes historic

Written by BloombergPublished Jan. 31 2026Last Updated Jan. 31 2026

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Gold prices have begun to retreat from recent highs, shifting investor focus from whether a decline will happen to how deep and prolonged the correction could become.

Ark Invest chief executive Cathie Wood said gold has reached a late-cycle extreme, raising the risk that the pullback may extend beyond a short-term dip.

Wood shared her assessment on social media platform X on Jan. 29, pointing to valuation signals that suggest exhaustion rather than the start of a sustained rally.

“Odds are high that the gold price is heading for a fall,”

Cathie Wood said.

Her analysis centred on gold’s market capitalisation as a percentage of the US money supply, known as M2, which includes cash, checking deposits, and savings accounts.

Wood noted that the ratio recently reached an all-time high, surpassing levels last seen during the 1980 peak when inflation and interest rates climbed into the mid-teens.

She said comparable extremes in the gold-to-M2 ratio only occurred during the early 1930s and around 1980, both of which were followed by long adjustment periods rather than durable bull markets.

The Ark Invest executive warned that gold now faces duration risk as well as downside risk as prices retreat from elevated levels.

"The ratio of gold to M2 has hit the all-time high recorded during The Great Depression in 1934,”

Cathie Wood added.

She highlighted that the 1930s were marked by extraordinary policy measures, including a sharp devaluation of the US dollar against gold and restrictions on private gold ownership.

"In that crisis, the dollar devalued relative to gold by almost 70% on January 31, 1934, the government banned private ownership of gold, and M2 collapsed,”

Cathie Wood emphasized.

Wood contrasted those conditions with the current economic environment, arguing that today’s US economy differs sharply from both the inflation-heavy 1970s and the deflationary 1930s.

She acknowledged that foreign central banks have been diversifying away from the US dollar, but noted that benchmark bond yields have already peaked and moved lower.

Wood said the 10-year US Treasury yield peaked near 5% in late 2023 and has since eased to around 4.2%.

She framed gold’s recent surge and pullback as part of a broader market cycle, where late-stage rallies often end abruptly.

“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,”

Cathie Wood highlighted.

Wood concluded that gold, rather than artificial intelligence, now shows the clearest signs of excess in financial markets.

“In our view, the bubble today is not in AI, but in gold,”

Cathie Wood emphasized.

She warned that a strengthening US dollar could trigger a sharp reversal similar to past cycles.

“An upturn in the dollar could pop that bubble, a la 1980 to 2000 when the gold price dropped more than 60%,”

Cathie Wood said.