Central Banks Double Down on Gold Amid Rising Debt and Sanction Risks

Gold’s share of global central bank reserves has surged from about 14% in 2023 to nearly 25% today, according to Joachim Nagel, the head of the Bundesbank. Speaking at the LBMA Global Precious Metals Conference in Sorrento, Italy, Nagel highlighted that physical gold held at home cannot be frozen by foreign sanctions, unlike bonds or bank deposits. He pointed to the 2022 freeze of $300 billion in Russian reserves as a key event that underscored this risk for central bankers worldwide.

The Bundesbank holds over 3,500 tonnes of gold, making it the world’s second-largest gold holder after the US. Nagel emphasized that rising government debt levels are another reason to hold gold, as it provides a safeguard against potential defaults. He noted that while part of the increase in gold’s reserve share is due to its price appreciation, central banks are also actively buying more gold to diversify their reserves.

The World Gold Council reported that official gold buying exceeded 1,000 tonnes annually from 2022 to 2024, with 863 tonnes purchased in 2025. Nagel’s remarks come amid a broader trend of de-dollarization, as central banks seek to reduce their exposure to foreign assets. He also suggested that rising government debt could further boost the gold price, as fiscal concerns grow.

For individual investors, Nagel’s logic applies similarly: physical gold held outside the banking system carries no counterparty risk, making it a valuable asset for diversification. The next key data points to watch include the IMF’s reserve data later this quarter and the Federal Reserve’s October 28 meeting.