Bundesbank’s Nagel Says Geopolitical Risks Boost Gold’s Role in Central Bank Reserves

Joachim Nagel, President of the Deutsche Bundesbank, emphasized gold’s growing importance in central bank reserves during the LBMA Global Precious Metals Conference in Sorrento, Italy. He noted that geopolitical risks, rising sovereign debt, and financial sanctions are pushing central banks to diversify their reserves, making gold a key asset. Nagel pointed out that gold’s share of global central bank reserves has risen from around 14% in 2023 to almost 25%, driven by both price increases and heightened geopolitical risks.

Nagel highlighted that gold’s physical nature makes it immune to counterparty risks, unlike foreign securities and deposits, which can be frozen through sanctions. This characteristic makes gold a crucial diversification tool during economic and geopolitical stress. He also noted that while rising global bond yields have made sovereign debt more attractive, concerns about government indebtedness have increased, potentially boosting gold’s appeal.

Nagel expressed optimism about the global economy’s resilience despite geopolitical uncertainties, such as the Middle East conflict and disruptions in the Strait of Hormuz. He noted strong world trade and investment in artificial intelligence infrastructure, while the euro-area economy is expected to expand 0.9% in 2026 and around 1.5% in 2027 and 2028. However, he cautioned that inflation remains a significant concern, with energy prices and other factors potentially fueling persistent inflation.

Nagel defended the European Central Bank’s recent interest rate hikes, stating that future policy decisions will remain data-dependent. He acknowledged the challenging inflation picture following the U.S.-Iran conflict, with oil prices rising from around $70 to above $100. Despite these challenges, Nagel believes gold will continue to play a significant role in central bank reserves.