Central Banks Boost Gold Reserves Despite High Bond Yields

Despite the 10-year Treasury now offering a yield of about 5.3%, central banks continue to add gold to their reserves. This was underscored by recent remarks from two senior European central bankers. Joachim Nagel, President of the Bundesbank, and Sergio Nicoletti Altimari, Deputy Governor of the Bank of Italy, both emphasized gold's role in their reserve strategies during a London Bullion Market Association conference in Sorrento.

Nagel highlighted geopolitical stress and the credit risks associated with high government debt, while Altimari described gold as 'probably the safe haven asset.' He noted that gold's traditional link to real yields has weakened significantly. This sentiment is backed by recent purchasing trends, with Poland adding 90 tons this year and China increasing its reserves for 21 consecutive months. The Czech Republic has also been consistently adding gold for 41 months straight.

The World Gold Council's 2026 survey revealed that 89% of central banks anticipate a rise in global gold reserves, with a record 45% planning to increase their own holdings. The council also noted that softer gold prices in the second quarter likely boosted central bank buying, which reached a record 289 tons, five times the amount from the previous quarter.

Central banks are prioritizing protection over yield. Bonds generate earnings, while gold provides a safeguard against unforeseen risks. Nagel described gold as a diversification tool to be held alongside bonds, not as a replacement. The 2022 freezing of reserves held in foreign custody reinforced the value of owning physical gold stored in one's own vaults. Metals Focus predicts official gold buying will reach roughly 720 tons this year, exceeding pre-2022 levels.