Cathie Wood is sounding the alarm about gold as global markets experience one of the most violent swings between assets in recent years.
As equities, precious metals and futures markets rallied within hours, the founder of ARK Invest argued that gold’s latest rally has the hallmarks of a late-cycle bubble—one now struggling with leverage, crowded positioning, and a fragile market structure.
According to Cathie Wood, the odds are high that the price of gold is headed for a decline, with the Ark Invest executive pointing to an extreme valuation signal rarely seen in modern financial history.
According to its analysis, gold market capitalization as a share of the US money supply (M2) hit an intraday all-time high, surpassing both the inflation peak of 1980 and levels last seen during the Great Depression in 1934.
“In our view, the bubble today is not in AI, but in gold,” Wood said, arguing that current prices imply a macro crisis that resembles neither the inflationary 1970s nor the deflationary collapse of the 1930s.
She noted that while foreign central banks have been diversifying away from the dollar, US bond markets tell a different story, with the 10-year Treasury yield retreating from its peak in 2023 near 5% to around 4.2%.
Gold Market Cap as a Percentage of M2. Source: Cathie Wood on X
An eventual increase in the dollar, she warned, could puncture the gold rally as it did between 1980 and 2000, when gold prices fell more than 60%.
However, not everyone agrees with Wood’s framework. Macro traders pushed back, arguing that gold to M2 is no longer a reliable signal in a post-QE, post-digital financial system.
In that view, the graph can say less about the gold that is in a bubble and more about the traditional monetary aggregates that lose the informative value.
This follows a backdrop of a dramatic market stress test. During one trading session, gold fell roughly 8%, wiping out nearly $3 trillion in market capitalization. Silver fell by more than 12%, wiping out about $750 billion in value.
US equities were hit in parallel, with the S&P 500 and Nasdaq dropping more than $1 trillion intraday before rebounding sharply by the close.
Price Performance of Gold (XAU), Silver (XAG), and S&P500 (SPX). Source: TradingView
By the end of the session, most of the damage had been retraced. Gold recovered close to $2 trillion in market value, silver regained roughly $500 billion, and US equities recovered more than $1 trillion.
In all, analysts estimated that about $9 trillion in market capitalization swung between metals and equities in roughly six and a half hours, illustrating extreme volatility rather than permanent value destruction.
Analysts like The Bull Theory agree that leverage, not fundamentals, was the primary catalyst. Futures traders were piled into gold and silver with aggressive leverage, in some cases as high as 50x to 100x. This followed a multi-year rally that saw gold rise around 160% and silver nearly 380%.
When prices began to slip, forced liquidations and margin calls accelerated the move. In silver, pressure intensified after CME increased futures margins to 47%, forcing additional selling in thin liquidity.
Equities provided the initial spark. Microsoft, a heavyweight in leading indices and systematic risk models, fell as much as 11–12% after softer cloud guidance, increased AI-related capital spending, and its removal from Morgan Stanley’s top picks list.
The selloff mechanically dragged the Nasdaq and the S&P 500 lower, prompting index-linked selling, volatility target reductions, and cross-asset de-risking. As correlations tightened, metals, already stretched and crowded, broke along with stocks.
Macro analysts emphasized that the episode was not driven by a Fed surprise, geopolitical escalation, or a sudden change in economic policy.
Instead, it reflected a balance sheet reset. When margin growth slows, capital spending increases, and leverage piles on a crowded trade, price discovery doesn’t happen smoothly. It gaps.
Taking all of these together, the incident reflects how quickly leverage can turn a popular trade into a violent wind-up.
Read original story Cathie Wood calls Gold Top as Markets Plunge $9 trillion around assets by Lockridge Okoth at beincrypto.com
