Central Banks Hold Gold Despite Rising Bond Yields

Central banks continue to prioritize gold as a strategic reserve asset despite rising U.S. Treasury yields and higher bond yields. At the London Bullion Market Association's annual conference in Sorrento, central bankers affirmed gold's role in reserve diversification, safe-haven demand, and a structural shift in buying since 2022. Gold prices have remained above $4,000, showing resilience even as U.S. Treasury yields reach multi-decade highs.

Metals Focus forecasts a 15% year-on-year decline in central bank gold demand to 720 metric tons by 2026, but demand will still exceed pre-2022 levels due to a structural market shift. Bank of Italy Deputy Governor Sergio Nicoletti Altimari emphasized gold's safe-haven role in an environment of high geopolitical risk and economic fragmentation. Bundesbank President Joachim Nagel noted that while higher yields improve the relative attractiveness of bonds, the case for diversification into gold remains significant due to persistent geopolitical stress and credit risks linked to high debt levels.

In China, the top gold-consuming market, bar-and-coin purchases by investors and institutions are expected to surpass jewelry consumption for the first time in 2025. Shanghai Gold Exchange Vice President Zeng Hui highlighted the changing demand structure and pricing framework in the gold market. Concerns over high public debt and fiscal expansion are also supporting demand, weakening gold's traditional inverse relationship with real bond yields.