Ah, the golden alternative.
Of course, the author like most tradfi journos and economists, think of gold as a barbarous relic of an uncivilized age past. We need monetary policy by experts, not whim of nature
After surging for years, the price of gold has entered the realm where storytelling drives its price. Breaking free of the fundamental forces that long explained its ups and downs,
Gold has long been seen as a safe haven because its price has kept pace with the rate of inflation for centuries, albeit punctuated by busts and booms.
"The price of gold has skyrocketed since [2022], but what I once called the “anti-dollar revolution led by foreign central banks” can no longer explain it.""The price of gold has skyrocketed since [2022], but what I once called the “anti-dollar revolution led by foreign central banks” can no longer explain it."
It's a Bubble
Over the past year, the pace of central bank purchases has slowed down. Jewellery demand has plunged as consumers balk at the high prices. Instead, demand has exploded from investors in all the major markets from the US to India and the UK. The investor share of gold purchases doubled last year to 35 per cent worldwide, led by torrential flows into gold ETFs. Nowhere is the fervour more intense than in China, where retail “auntie” investors have jumped headfirst into the buying spree.
gold is being driven largely by financial demand, and this shift is upending the traditional understanding of how to calculate its value. The models long used to explain the price of gold, which include real bond yields and inflation expectations, have all broken down.
STORYTELLING:
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.
Another popular argument is that gold continues to thrive as a haven from “dollar debasement”. But if that is so, why have other alternatives to the dollar such as bitcoin been tanking, and why have other dollar assets like US stocks and bonds been holding up?
Yes, precisely. WHY has (superior) alternatives like BTC been tanking??
It is difficult to see what might break this momentum. 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.
'Yes, precisely. WHY has (superior) alternatives like BTC been tanking??'
Bitcoin may be superior from your point of view but from the point of view of the central banks leading the charge into Gold, its not.
China mines more gold than any other nation and Russia is not far behind.
From a geopolitical PoV the BRICS nations and their central banks now naturally prefer gold to USTs.
China is using gold as backing for its advancement of the Yuan as a trade settlement alternative to the USD.
Bitcoin is a tiny market with low liquidity and highly associated with the US and Trump...hardly appealing to the BRICS nations.
The values of individual freedom and sovereignty that Bitcoin supports are not aligned with those of the nation states now stacking gold at unprecedented rates.
Sharma's right that gold has become narrative-dependent, but he misses why: traditional monetary policy became so discretionary that gold's value proposition shifted from industrial/jewelry fundamentals to "protection against central bankers." Bitcoin addresses this directly—not by out-narrating gold, but by removing the need for narrative altogether. When your monetary policy is enforced by mathematics rather than expert judgment, your value proposition doesn't depend on fear cycles. In my years tracking macro cycles, I've noticed Bitcoin and gold move differently now because Bitcoin's supply schedule is predictable while gold's narrative can swing based on Fed statements or geopolitical shocks. They're not the same insurance policy anymore.