The gold trade is now divorced from fundamentals: explained here
Despite a global economy and macroeconomic landscape that, on paper, should be hindering gold’s ascent, the yellow metal has remain stubbornly volatile – yet consistently high in February.
In a stunning rally, bullion has rallied past the $5,000 level again, defying conventional gravity.
And while the gold trade now seems “disconnected from any fundamental story,” for those holding the bag, it isn’t necessarily a signal to trim exposure, according to Ruchir Sharma.
Sharma is chairman of Rockefeller International and the founder of Breakout Capital.
Gold has parted ways from historical drivers
Historically, gold price has followed a predictable script written by real interest rates and inflation data – neither of which “explains what’s happened with bullion” in 2026.
The metal secured a sturdy floor as central banks started diversifying away from the dollar in 2023, but even that demand can no longer account for the “parabolic price action” in recent months.
Instead of macroeconomic data, gold is being propelled by sheer “financial flow with massive ETF buying,” Sharma told CNBC in an interview today.
What this suggests is: gold has evolved from a hedge against specific risks into a pure momentum play.
While investors once bought gold because they feared inflation or a weakening dollar, they are now buying gold simply because the price is going up.
This creates a self-fulfilling prophecy where momentum itself becomes the “fundamental”, leaving traditional metrics like bond yields and currency stability in the rearview mirror.
What’s unique about gold’s rally in 2026
What makes the current rally particularly “unique,” Sharma noted, is that no other asset class seems to be pricing in the same level of catastrophe that gold implies.
If gold were rising due to “dollar debasement” or “US deficit” concerns, one would expect to see US bond yields spiking or the dollar cratering.
Instead, both have remained relatively stable.
Even Bitcoin – once hailed as the “digital gold” and a primary alternative to the greenback – has been crashing, leaving gold as the sole outlier in the risk-premium world.
“People are coming up with all sorts of stories to say why gold should be going up,” Sharma added.
On “Squawk on the Street”, the industry veteran also drew a comparison with the late 1970s, when “momentum trades got so powerful that they justified prices,” he noted.
How to play gold at current levels?
According to Ruchir Sharma, while gold does appear divorced from fundamentals, it still doesn’t warrant a hasty exit.
“We are caught in this very strange situation with no fundamental backing to the price of gold, yet nothing to stop its momentum either,” he added.
In the 1970s, it took a historic, massive increase in real interest rates to break bullion’s “relentless” ascent.
Looking ahead through 2026, the Rockefeller expert does not see a similar catalyst on the horizon.
For investors, it simply warrants playing the trend while keeping one eye on the exit.
As long as financial flows into ETFs continue and no monetary surprises materialize, the gold price rally could persist simply because there is no force strong enough to pull it down.
The post The gold trade is now divorced from fundamentals: explained here appeared first on Invezz
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