No, honestly, they must be [a combination of GPS and barometric data].

After all, the grade is your vertical speed divided by your total speed, and the Garmin uses the GPS to determine your total (mostly horizontal, of course) speed.

It does have the option of using it's barometer to determine your vertical speed (and that gives more accurate results in the GPSs that have one), but not your total speed. If it's got a sensor on your wheel it could use that to determine your speed, but considering that it works without that ... it's obviously optional.