Central Bankers Defend Gold’s Reserve Role Amid Rising Yields

Two senior central bankers have reaffirmed gold's importance in official reserves, despite rising bond yields that typically reduce demand for non-yielding assets like gold. Speaking at the London Bullion Market Association’s annual conference in Sorrento, Italy, Bank of Italy deputy governor Sergio Nicoletti Altimari emphasized gold's role as a safe haven asset, citing geopolitical tensions, economic fragmentation, and concerns over rising public debt.

Bundesbank President Joachim Nagel acknowledged that higher yields make bonds more attractive but stressed that gold remains valuable for diversifying away from sovereign-credit risk during times of geopolitical stress. Analysts note that gold prices have stayed supported above $4,000, even as US Treasury yields reached multi-decade highs, suggesting a weaker-than-usual inverse relationship between gold and yields.

Metals Focus forecasts that central bank buying of gold will slow by 15% year-on-year to 720 metric tons in 2026, though this level remains higher than pre-2022 levels. Altimari described this trend as a structural shift, particularly among emerging-market central banks. Meanwhile, China, the largest consumer market, is shifting toward more investment demand, with bar-and-coin buying expected to surpass jewelry purchases for the first time in 2025, according to Shanghai Gold Exchange vice president Zeng Hui.

For markets, the steady demand from central banks, driven more by long-term strategy than short-term yields, could make gold's price behavior less predictable. Officials focused on diversification and geopolitical risks may continue adding bullion even as yields rise, challenging traditional models that assume gold must drop when yields climb.