Cathie Wood Warns The Real Bubble Is Gold As Robin Brooks Exposes 'Bogus' Central Bank Buying Myth
The investment world is facing a stark warning as ARK Invest's Cathie Wood and former IIF Chief Economist Robin Brooks signal that the historic rally in gold is a speculative bubble nearing its breaking point.
The 1934 Signal
Wood argues that gold's recent ascent is not a reflection of economic stability, but a “parabolic move” typical of a cycle’s end. She notes that the market cap of gold as a percent of the U.S. money supply (M2) has reached levels not seen since the Great Depression.
"The ratio of gold to M2 has hit the all-time high recorded during The Great Depression in 1934. 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," Wood posted on X.
Wood maintains that while investors are focused on technology, the true danger lies in precious metals. "In our view, the bubble today is not in AI, but in gold. An upturn in the dollar could pop that bubble, a la 1980 to 2000 when the gold price dropped more than 60%."
Debunking The Central Bank Narrative
While many bulls credit the rally to institutional diversification, Brooks argues in a Substack post that the data used to support this is fundamentally flawed.
Brooks claims the “central bank narrative as a driver of gold prices is bogus,” asserting that the rally is actually driven by retail speculation. Brooks explains that many analysts are confusing price appreciation with actual buying.
"So all this chart is really doing is plotting the rise in gold prices twice. Once via the impact on its share in central bank reserves and once in terms of the actual gold price. This chart therefore correlates two series that are basically the same and says absolutely nothing about whether central banks are actually buying gold," Brooks wrote, also sharing the same chart on X.
A Looming Correction
According to Brooks, IMF data on volumes show no massive shift in holdings. "The precious metals bubble of recent months is all about retail buying, like every other bubble before it."
Wood agrees that the current macro environment does not support gold's high valuation, noting that the “US economy today looks nothing like the double-digit inflation-prone 1970s or the deflationary bust of the 1930s.”
Both experts suggest that if the U.S. dollar strengthens, the “out-of-this-world” spikes in gold will likely face a sharp, painful reversal.
Gold Prices Start Declining
During the publication of this article, Gold Spot U.S. Dollar was down 2.60% at $5,232.81 per ounce, retreating from the all-time high of $5,595.46.
Here’s a list of Gold ETFs that investors can consider.
| Gold ETFs | YTD Performance | 6-Month Performance | One Year Performance |
| VanEck Merk Gold ETF (NYSE:OUNZ) | 24.50% | 64.78% | 92.33% |
| iShares Gold Trust (NYSE:IAU) | 24.53% | 64.83% | 92.51% |
| SPDR Gold MiniShares Trust (NYSE:GLDM) | 24.53% | 64.95% | 92.76% |
| SPDR Gold Trust (NYSE:GLD) | 24.51% | 64.77% | 92.17% |
| Goldman Sachs Physical Gold ETF (BATS:AAAU) | 24.50% | 64.79% | 92.51% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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