Cathie Wood said the divergence of base metal prices from gold could be pointing to signs of extreme economic weakness.
Cathie Wood, CEO and CIO of ARK Investment Management, recently raised concerns about the state of the global economy as gold prices climb while other metals struggle to keep up. In a recent statement, Wood noted a unique divergence between gold and other metal prices, which on average are falling in comparison to gold.
“You’ll notice the gold price has broken out recently, so we’ve been forced to ask the question, ‘Is the gold price pointing to higher inflation ahead?’”
Wood said if that is the main reason behind gold’s move, it’s likely that base metals will begin moving in a similar direction to the yellow metal.
However, she noted that at current, that is not the case, and the current metals-to-gold ratio is below levels leading into the 2008 and 2009 financial crisis.
“It’s approaching COVID-level lows and what that usually means is a very weak economy,” Wood said. “I do think China is very weak and I think the cyclical part of the economy is very weak.”
Historically, where is the ratio now?
At the tail end of 2008, the metals-gold ratio reached about 0.43. Heading into the COVID-19 pandemic, it briefly went under 0.4 and it is currently at about 0.42. The ratio has been as high as 0.7 during the economic comeback post-COVID in late 2021 and 2022, but has been in steady decline ever since.
Written by Tim Zyla of The Jerusalem Post
