Bundesbank President Joachim Nagel told the London Bullion Market Association's annual conference that the case for central banks to keep diversifying into gold remains significant, despite rising bond yields making government debt more attractive to reserve managers. Other speakers in Sorrento, Italy, pointed to a structural shift in the market since 2022 and Chinese bar-and-coin purchases overtaking jewellery demand for the first time in 2025.
Nagel defends the case for official gold buying
Speaking at the LBMA conference in Sorrento, Italy, on Monday, Nagel said the case for central banks to diversify further into gold remains significant, citing continued geopolitical stress and the credit risk tied to high government debt levels. He said gold would keep playing a significant role in central bank reserves.
A key part of his argument rests on counterparty risk. Nagel said physical gold does not depend on any issuer or counterparty meeting its financial obligations, while foreign securities and deposits can be frozen through sanctions. Gold held domestically faces no such exposure.
The remarks carry weight because the Bundesbank holds more than 3,500 tonnes of gold, the second-largest official holding in the world. Still, Nagel acknowledged that higher yields make bonds relatively more attractive to reserve asset managers, with US Treasury yields at multi-decade highs.
Other officials back the diversification case
Bank of Italy Deputy Governor Sergio Nicoletti Altimari called gold arguably the safe haven asset. He said the market has undergone a structural shift since 2022, driven by emerging-market central bank buying, and that gold's traditional inverse relationship with real yields has weakened amid concerns about public debt and fiscal expansion.
Shanghai Gold Exchange Vice President Zeng Hui said Chinese purchases of bars and coins overtook jewellery consumption for the first time in 2025.
Central bank demand set to slow this year
Not all signals point the same way. Consultancy Metals Focus expects central bank gold demand to slow by about 15% this year, to around 720 tonnes. Even so, endorsements from two of Europe's largest official gold holders add weight to the view that reserve diversification will continue to underpin demand, even as higher yields weigh on prices in the near term.
Source: Investinglive
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