Storytellers behind gold boom? Why bullion bull Ruchir Sharma is now agnostic

Gold as a commodity has seen significant volatility recently. In a market divorced from fundamentals, the ultimate 'safe haven' is now being driven by "random stories," according to market expert Ruchir Sharma.

“After surging for years, the price of gold has entered the realm where storytelling drives its price,” the Chairman of Rockefeller International said in his latest column for the Financial Times.

Gold prices skyrocketed earlier this year, after jumping 65% in 2025. However, the strong rally then lost steam amid profit booking and other factors.


'Storytelling drives gold prices'

The bullion expert explained that for so long, gold prices were driven by fundamental forces, which explained its ups and downs. However, it is now entering a phase where “storytelling drives its price” and gold is now rising on “tales of global risk and uncertainty”.

The gold price has kept pace with the rate of inflation for centuries, despite minor fluctuations during booms or depressions. “The booms tended to come in periods when real interest rates declined. As returns fell on money held in savings accounts or bonds, people tended to move their wealth into gold, which offers no yield but at least can rise in price,” he added.

According to the analyst, this pattern began to change in a material way in 2023. The main driver of this change was a massive increase in gold purchases by the central banks. These banks sought to move their holding away from the dollar which remained volatile as US imposed sanctions against Russia due to the Ukraine war.

“The price of gold has skyrocketed since then, but what I once called the 'anti-dollar revolution led by foreign central banks' can no longer explain it,” Sharma said.

Over the past year, the speed of central bank gold purchases has slowed down and jewellery demand has fallen due to high prices. Despite this, the demand for gold has exploded from investors in all major markets, from US to India and UK, according to the analyst. “The investor share of gold purchases doubled last year to 35% worldwide, led by torrential flows into gold ETFs. Nowhere is the fervour more intense than in China, where retail "auntie" investors have jumped head-first into the buying spree. In short, gold is being driven largely by financial demand,” Sharma added in his column.

He explained that all the traditional models to calculate the value of gold have now become irrelevant due to the massive surge. In comparison to inflation, gold is now five standard deviations above its historical norm, he further said, adding that this simply shows a “freakishly unusual behaviour”.

Ruchir Sharma cited the World Gold Council’s model which attributed more than 80% of gold’s recent gains to “risk and uncertainty” or “residuals”. “The story gold bulls are telling is that the current state of the world evokes the backdrops of past gold super cycles - meaning long and strong bull markets like those of the 2000s and, especially, the 1970s. But inflation today is nowhere near the double-digit levels of the Jimmy Carter era. And it is hard to argue that uncertainties such as Donald Trump, tariffs and Ukraine are objectively more disconcerting than, say, oil embargoes, Vietnam and the Iran hostage crisis were back then,” he said.

The analyst also dismissed the idea of gold’s massive gains being driven by “dollar debasement” as other alternatives to dollar like Bitcoin have been plunging.

According to Sharma, gold is currently trading at a price which is around five times that of its implied or fair value, at around $5,000 per ounce. This is higher than the 2.5 times premium with which gold was trading over its fair value at $500 per ounce during the later stages of its 1970s boom.

What can break gold's latest rally ?

According to Sharma, it is difficult to see what can break the latest rally in gold prices. He explained that liquidity remains plentiful worldwide, so a lot of people are looking for more places to put money. “Even after the recent buying sprees, investors hold relatively little gold in their portfolios. The 1970s super cycle ended only when the Federal Reserve began to aggressively raise rates to fight inflation, and there is little chance of that happening now. Gold bugs therefore say the yellow metal has plenty of room to rise, and they may be right,” he stated in his column.

While prices may appear to have parabolically jumped in recent months, the rise has been much less spectacular than the spike in the final stage of the 1970s boom, when gold doubled in just two months.

“While I have been bullish on gold for many years, I'm more agnostic now. In a market divorced from fundamentals and driven by an increasing number of random stories, it is hard to know which narrative is for real and will hold. If you want to buy more gold, you just gotta believe,” Sharma concluded.