ECB's Nagel: Central bank gold buying case stays strong

Remarks from the head of the world's second-largest official gold holder strengthen the structural argument that has kept gold above $4,000 even as Treasury yields hit multi-decade highs. Official-sector diversification — driven by sanctions risk and concerns about sovereign debt — is providing a price floor even as rate expectations pressure the metal. The Bank of Italy's observation that gold's inverse link to real yields has weakened is significant for traders. It suggests rate moves may have a smaller impact on gold than historical patterns would indicate. The main offsetting factor is the Metals Focus forecast of slower central bank purchases this year, which makes gold more dependent on investment demand for a recovery. This week's Federal Reserve minutes remain the key near-term driver.

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The head of one of the world's biggest gold vaults says what bond yields give, sanctions risk can take away, and central banks are still choosing bullion.

Summary:

• Bundesbank President Joachim Nagel said the case for further diversification into gold remains significant, citing geopolitical stress and high-debt credit risk.
• He said physical gold carries no counterparty risk and can't be frozen by sanctions, unlike foreign securities and deposits.
• He acknowledged that higher yields make bonds more attractive to reserve managers. The Bundesbank holds more than 3,500 tonnes of gold.
• Bank of Italy's Nicoletti Altimari called gold arguably the safe haven asset and said its link to real yields has weakened.
• Metals Focus expects central bank gold demand to slow about 15% this year to around 720 tonnes.

Bundesbank President Joachim Nagel stated that despite rising bond yields making government debt more appealing to reserve managers, the rationale for central banks to diversify further into gold remains strong. He delivered these remarks at the London Bullion Market Association's annual conference in Sorrento, Italy, on Monday.

Nagel cited persistent geopolitical tensions and the credit risk tied to elevated government debt levels as motivations for holding more gold, according to Kitco News and FXStreet. He indicated that gold would occupy a significant role in central bank reserves.

A central element of his reasoning was the lack of counterparty risk. Nagel noted that physical gold does not rely on any issuer or counterparty fulfilling its financial promises, whereas foreign securities and deposits are vulnerable to sanctions-related freezes. Gold stored domestically faces no such threat.

The comments carry weight given the source. The Bundesbank holds over 3,500 tonnes of gold, the second-largest official stockpile globally.

Nagel recognised the difficulty posed by higher yields, admitting they make bonds relatively more appealing to reserve asset managers. With US Treasury yields at multi-decade peaks, that tension sits at the core of today's gold market.

Other conference speakers echoed a comparable view. Bank of Italy Deputy Governor Sergio Nicoletti Altimari characterised gold as arguably the safe haven asset. He stated that the market has experienced a structural shift since 2022, driven by emerging-market central bank purchases. He added that gold's traditional negative correlation with real yields has softened amid concerns about public debt and fiscal expansion. Shanghai Gold Exchange Vice President Zeng Hui noted that Chinese bar and coin purchases surpassed jewellery consumption for the first time in 2025.

Not every indicator points in the same direction. Consultancy Metals Forecasts anticipates that central bank gold demand will decline roughly 15% this year, reaching about 720 tonnes.

Nevertheless, endorsements from two of Europe's biggest official gold holders reinforce the view that reserve diversification will continue to support demand, even as higher yields pressure prices in the short term.