Central Bankers Affirm Gold's Safe Haven Role Despite Rising Bond Yields

Gold continues to hold its status as a key reserve asset despite rising bond yields, according to central bankers speaking at the London Bullion Market Association's annual conference in Sorrento, Italy. The metal's appeal as a safe haven has been bolstered by concerns over government debt and geopolitical instability, even as bond yields surge.

While gold prices have declined around 4% this year due to higher US Treasury yields, they have remained supported by central bank buying and safe-haven demand, keeping prices above $4,000. Sergio Nicoletti Altimari, deputy governor of the Bank of Italy, emphasized gold's role as a safe haven asset, particularly in an environment of high geopolitical risk and economic fragmentation.

Bundesbank President Joachim Nagel acknowledged that rising yields make bonds more attractive for reserve asset managers. However, he stressed that diversification into gold remains important due to geopolitical stress and credit risks associated with high debt levels.

Analysts expect central bank gold demand to slow by 15% year-on-year to 720 metric tons by 2026, but it is projected to stay above pre-2022 levels. Altimari noted a structural shift in the gold market since 2022, driven by central-bank purchases in emerging economies and concerns over public debt and fiscal expansion, which have weakened gold's traditional inverse relationship with real bond yields.

In China, the top gold consumer, demand is increasingly driven by investment and institutional investors, with bar-and-coin purchases surpassing jewelry consumption for the first time in 2025, according to Shanghai Gold Exchange vice president Zeng Hui.