‘Gold Isn’t a Hedge Anymore’: Ruchir Sharma Warns 2025 Rally Mirrors 1979 Boom

The massive surge in gold price in 2025 could be a warning signal amid the euphoric investor sentiment, according to author and financial expert Ruchir Sharma. He sees the rally as reminiscent of 1979, which is being driven by liquidity, geopolitical stress, and growing speculative flows from investors.

Sharma, the Rockefeller International chairman and Breakout Capital CIO, told CNBC that while the 1979 rally was fuelled by inflation and geopolitical crises, today’s boom is being driven primarily by massive liquidity still circulating in the system.

“Stocks are partying like it’s 1999 and gold is partying like it’s 1979,” Sharma said.

Speaking on CNBC’s Squawk on the Street show, earlier this week on Oct. 20, Sharma explained that gold’s rally initially made sense. After the 2022 sanctions on Russia, central banks diversified away from the dollar. This created a strategic demand for the metal. However, the narrative has shifted, with speculative flows from retail investors and ETFs now playing a major role in driving prices, he added.

“The main demand for gold in the last few months has come from ETFs. In fact, ETF flows into gold last quarter were the highest ever,” he said. “And there’s no good story that too much money cannot spoil.”

Sharma warned that while the yellow metal’s recent performance resembles 1979, the underlying conditions are different, driven by liquidity rather than inflation. Sharma highlighted that over $1.5 trillion in excess cash remains in US money market funds, which is fuelling the momentum across assets. These include gold, stocks to crypto, and AI-related investments.

These factors have raised concerns, Sharma added. Gold is no longer acting as a traditional hedge in times of crisis.

“This isn’t a hedge anymore—it’s a parallel trade,” Sharma said. “Everything is rising. We've never had a period where gold outperformed stocks during a bull market. That’s just never happened.”

Gold is now moving with risk assets, driven by retail enthusiasm, Sharma warned, adding that if inflation returns and the Federal Reserve withdraws liquidity, gold could quickly lose value and fail to offer downside protection.

“On the downside, there’ll be a positive correlation. So be prepared….everyone could end up unhappy,” he said. The yellow metal, which surged nearly 53% in 2025 to an all-time high of $4,381.21 per ounce last week, has currently taken a breather.