Gold's meteoric rise to record highs above $5,500 has triggered intense debate among analysts, with technical indicators flashing extreme overbought warnings and prominent investor Cathie Wood declaring the precious metal is in a bubble. The Relative Strength Index (RSI) for gold reached 95 on a six-week chart, a level only seen once before in 1968, which historically preceded major corrections of up to 63%.
The market experienced a dramatic volatility shock on January 29, 2026, with approximately $9 trillion in market capitalization swinging across assets within roughly 6.5 hours. Gold fell roughly 8%, wiping out nearly $3 trillion in market cap, while silver dropped more than 12%, erasing about $750 billion in value. US equities were hit in parallel, with the S&P 500 and Nasdaq shedding over $1 trillion intraday. However, by the session's close, much of the damage was retraced, with gold recovering close to $2 trillion.
ARK Invest founder Cathie Wood argued that gold's market capitalization as a share of the US money supply (M2) hit an all-time high intraday, surpassing both the 1980 inflation peak and levels last seen during the Great Depression in 1934. "In our view, the bubble today is not in AI, but in gold," Wood stated, warning that an eventual upturn in the dollar could puncture the rally as it did between 1980 and 2000 when gold prices fell more than 60%.
Analysts from The Bull Theory and others identified leverage as the primary catalyst for the violent swing. Futures traders had piled into gold and silver with aggressive leverage, in some cases as high as 50x to 100x, following multi-year rallies of around 160% for gold and nearly 380% for silver. When prices began to slip, forced liquidations and margin calls accelerated the move. Pressure intensified in silver after the CME raised futures margins by up to 47%.
Despite the technical warnings and volatility, structural demand factors provide a counterbalance. Central bank gold buying has accelerated, with global central banks adding thousands of tonnes to their holdings since late 2019. Gold has overtaken US Treasuries in central bank reserves for the first time in over 20 years, with holdings reaching $5 trillion after tripling since 2019 through roughly 4,500 tonnes of purchases. This shift is driven by geopolitical uncertainty, currency debasement concerns, and long-term inflation hedging.
The broader outlook remains a balance between technical caution and macroeconomic support. The market consensus is not one of imminent collapse but of conditional probability, with gold's trajectory reflecting a market at an inflection point—supported by strong fundamentals yet stretched by rapid momentum.
