Predicting a Gold Price Crash Using the Example of 1980s Reaganomics
Cathie Wood, CEO of Ark Invest, who is widely known as 'Donnamu Unni,' has predicted a sharp decline in gold prices.
Recently, the U.S. economic media outlet TheStreet reported that CEO Wood pointed out on the Ark Invest podcast that "the ratio of gold holdings to money supply (M2) is at a historic high, excluding the Great Depression."
As of 2025, the ratio of gold’s market capitalization to the money supply (M2) stands at 125%, matching the level seen in 1980 (125%), which was the second highest after the Great Depression (171%). In other words, the value of gold has risen significantly compared to the value of currency.
CEO Wood stated, "Many gold buyers are hedging against inflation due to the surge in liquidity during the COVID-19 era," but also pointed out, "Historically, when concerns about inflation subside, gold prices have plummeted."
However, CEO Wood analyzed that it is not additional interest rate hikes, but rather strong real growth and productivity that will ease inflationary pressures. She argued, "If the economy grows through technologies such as blockchain, artificial intelligence (AI), robotics, and automation, companies will be able to produce more at lower costs, which will bring prices down," adding, "Ultimately, inflation will decline."
CEO Wood explained, "In 1980, gold prices peaked at $850 per ounce, but fell by 67% over the next five years," attributing this to the effectiveness of Reaganomics and investors shifting their focus to the stock and bond markets. Reaganomics refers to the economic policies pursued by U.S. President Ronald Reagan in the 1980s, which included significant spending cuts, substantial income tax reductions, deregulation of businesses, and monetary tightening to curb inflation.
She added, "I believe we are moving into a situation beyond the Reaganomics market, which is why gold prices could decline." CEO Wood also remarked, "Especially when considering the tax cut policies of the Donald Trump administration, I consider this 'Reaganomics on steroids,'" and said, "It would not be surprising to see such developments within the next four to five years." She further noted that, in the long term, Bitcoin will outperform gold.
Meanwhile, gold prices have continued their rally even after surpassing $4,000 per ounce (about 5.91 million won) for the first time ever in October. On December 4, gold reached $4,243 per ounce (about 6.27 million won) on the New York Mercantile Exchange (COMEX), marking a 5.95% increase compared to October 7, when it first broke the $4,000 mark. As the stock market has shown signs of stagnation, demand for gold as a safe-haven asset has increased.
Additionally, a survey conducted by investment bank Goldman Sachs at the end of last month among more than 900 institutional investors found that 36% of respondents expect gold prices to exceed $5,000 per ounce next year.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
