Gold Bubble Alert as Wood Flags Historic M2 Valuation

• Gold tops $5,600 and near $40T market cap as Cathie Wood flags bubble risk.
• Gold-to-M2 ratio hits Great Depression-era highs, signaling valuation extremes.
• Central bank buying and Basel III rules cited as structural demand drivers.

ARK Invest Chief Executive Officer Cathie Wood stated that recent gold market conditions resemble a bubble, citing the metal’s price rally and rising valuation relative to the U.S. money supply. Gold recently traded above $5,600 per ounce, pushing its market capitalization close to $40 trillion, before falling more than 3% to around $5,230 during a volatile trading session.

Wood warned that a strengthening U.S. dollar could trigger a major correction, citing historical periods when gold declined following macroeconomic shifts. She referenced the 1980 to 2000 cycle, when gold prices fell by more than 60%.

Gold-to-M2 Ratio Hits Historical Extremes

Wood highlighted the ratio of gold’s market capitalization to the U.S. M2 money supply, noting that the metric recently reached levels last seen during the Great Depression. According to her analysis, the ratio peaked near 171% in the early 1930s and again surged to similar levels by 2025.

She also noted a second historical peak near 125% in the early 1980s, a period marked by high inflation and elevated interest rates. Wood argued that the current spike reflects gold’s valuation outpacing broad money supply growth during periods of macroeconomic stress. Wood added that the current economic environment differs from the 1930s and the inflationary 1970s, citing a 10-year U.S. Treasury yield of around 4.2% after peaking at 5% in late 2023.

Diverging Views on Gold Market Drivers

Market participants expressed mixed reactions to Wood’s comments. Some observers argued that gold’s rally corresponds to continued monetary expansion and geopolitical uncertainty rather than speculative excess. Others questioned the relevance of M2 as a valuation benchmark in a digital financial system.

Gold supporters pointed to structural demand factors, including central bank purchases exceeding 1,000 tonnes last year and regulatory changes. Commentary referenced Basel III’s classification of gold as a Tier 1 high-quality liquid asset, with phased compliance through July 2028, as a factor supporting sustained institutional accumulation.

Additional commentators questioned whether a single valuation chart can define a bubble across precious metals markets, including silver and platinum group metals.

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