Ark Investment Management founder Cathie Wood issued a series of posts on social platform X on Thursday, warning about the bubble risks in gold.
Wood stated, "The probability of a decline in the gold price is high. During today's session, gold's market value as a percentage of the U.S. money supply (M2) hit a record high: surpassing the peak in 1980, when inflation and interest rates soared above 15%, and even more startlingly... the gold-to-M2 ratio has reached its highest level since the Great Depression era of 1934. During that crisis, on January 31, 1934, the U.S. dollar was devalued by nearly 70% against gold, the government prohibited private ownership of gold, and M2 contracted sharply."
Wood continued, "Today's U.S. economy is starkly different from the period of double-digit inflation in the 1970s or the deflationary depression of the 1930s. Admittedly, foreign central banks have been reducing their reliance on the U.S. dollar for years; however, the 10-year U.S. Treasury yield peaked at 5% in late 2023 and has now fallen to 4.2%."
Wood concluded, "While parabolic moves tend to push asset prices to levels beyond most investors' expectations, such astonishing surges typically occur late in the cycle. We believe the current bubble is not in the artificial intelligence sector, but in the gold sector. A rising U.S. dollar could pop this bubble, much like the period from 1980 to 2000, when the gold price fell by more than 60%."
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