As global markets experience one of the sharpest cross-asset moves in recent years, Cathie Wood is sounding the alarm on gold.
With stock, precious metals and futures markets swinging wildly within hours, the ARK Invest founder believes gold’s latest rally bears the hallmarks of a late-cycle bubble – one that is now colliding with leverage, crowded positioning and fragile market structures.
Cathie Wood said the odds are high that gold prices will fall, with Ark Invest executives pointing to an extreme valuation signal rarely seen in modern financial history.
According to her analysis, gold’s market capitalization as a share of the U.S. money supply (M2) hit an all-time high during the session, exceeding levels seen during the 1980 inflation peak and the 1934 Great Depression.
“We believe that today’s bubble is not artificial intelligence, but gold,” Wood said. He believes that current prices indicate a macro crisis that is neither like the inflation of the 1970s nor the deflationary collapse of the 1930s.
She noted that while foreign central banks have been diversifying into the U.S. dollar, the U.S. bond market tells a different story, with the 10-year Treasury yield falling back to around 4.2% from a peak of nearly 5% in 2023.
Gold market capitalization as a percentage of M2. Source: Cathie Wood on X
She warned that an eventual rise in the U.S. dollar could dampen gold’s gains as it did between 1980 and 2000, when gold prices fell more than 60%.
However, not everyone agrees with Wood’s framework. Macro traders counter that in a post-QE, post-digital financial system, gold/M2 is no longer a reliable signal.
Viewed this way, the chart may be less about gold being in a bubble and more about traditional monetary aggregates losing their informational value.
This comes against the backdrop of intense market stress testing. In a single trading day, gold prices fell by about 8%, and nearly $3 trillion in market value was wiped out. Silver fell more than 12%, wiping out about $750 billion in market value.
The U.S. stock market was hit at the same time, with the S&P 500 and Nasdaq falling more than $1 trillion intraday, but rebounded sharply at the close.
By the end of the session, much of the damage had been remedied. The market value of gold has recovered by nearly US$2 trillion, the market value of silver has recovered by approximately US$500 billion, and the U.S. stock market has recovered by more than US$1 trillion.
Analysts estimate that the combined value of metals and stock markets fluctuated by about $9 trillion in about six and a half hours, illustrating extreme volatility rather than a permanent destruction of value.
Analysts like Bull Theory agree that leverage, not fundamentals, is the main catalyst. Futures traders buy gold and silver with aggressive leverage, sometimes as high as 50x to 100x. In the multi-year rally that preceded this, gold gained around 160% and silver gained nearly 380%.
When prices began to slide, liquidations and margin calls accelerated the move. In silver, pressure intensified after CME Group raised futures margins to 47%, forcing additional selling amid thin liquidity.
Stocks provide the initial spark. Microsoft, a heavyweight in major indexes and systemic risk models, has seen its shares fall 11-12% after weaker cloud guidance, higher artificial intelligence-related capital spending and its removal from Morgan Stanley’s preferred stock list.
The sell-off mechanically dragged the Nasdaq and S&P 500 lower, triggering index-linked selling, volatility target reductions and cross-asset de-risking. Metals, already nervous and crowded, collapsed along with stocks as correlations tightened.
Macro analysts stressed that the incident was not caused by a surprise from the Fed, geopolitical escalation or a sudden shift in economic policy.
Rather, it reflects a balance sheet reset. Price discovery doesn’t go smoothly when marginal growth slows, capital spending surges, and leverage is piled on top of crowded trades. It has gaps.
Taken together, the incident reflects how quickly leverage can turn a popular trade into a violent liquidation.
Read original story by Lockridge Okoth Cathie Wood says gold has peaked as markets unleash $9 trillion
