Gold has a reputation as a safe haven, but it pays no interest. So when bond yields climb, gold usually loses its shine. Yet this year, that old rule has been tested—and two of the world's top central bankers say the metal still earns its keep in official reserves.
Speaking at the London Bullion Market Association's annual conference in Sorrento, Italy, Bank of Italy deputy governor Sergio Nicoletti Altimari called gold “the safe haven asset,” pointing to geopolitics, economic fragmentation, and worries about rising public debt. Bundesbank President Joachim Nagel agreed that higher yields make bonds more attractive for reserve managers, but said gold still helps diversify away from concentrated sovereign-credit risk when geopolitical stress is elevated.
The comments come as US Treasury yields sit at multi-decade highs—a level that would normally push investors out of gold and into bonds. But gold prices have stayed supported above $4,000 an ounce, suggesting the usual inverse relationship between yields and bullion has weakened.
Why gold is defying the yield squeeze
For everyday investors, the logic is simple: when bonds pay more, holding a non-yielding asset like gold carries an opportunity cost. But central banks aren't typical investors. They manage national reserves with an eye on stability, diversification, and long-term strategy—not just quarterly returns.
Altimari and Nagel both stressed that gold's role goes beyond yield. With public debt levels rising across major economies and geopolitical tensions simmering, gold offers a hedge against risks that are hard to price. That's why even as yields climb, official buyers keep adding bullion.
This shift is not just about the big Western central banks. Emerging-market central banks have been the main drivers of gold buying in recent years, a trend Altimari described as a structural shift. These institutions often hold large amounts of US Treasuries and other sovereign debt, and gold provides a way to reduce that concentration risk.
China's changing appetite
China, the world's biggest gold consumer, is also tilting more toward investment demand. According to Shanghai Gold Exchange vice president Zeng Hui, bar-and-coin buying topped jewelry purchases for the first time in 2025. That's a notable milestone: historically, Chinese demand was driven by jewelry, but now investors are buying gold as a store of value amid economic uncertainty.
This shift matters because it suggests gold demand is becoming less about fashion and more about financial security. When consumers buy bars and coins, they're making a long-term bet on the metal, not just buying a gift.
What it means for investors
For markets, the key number is Metals Focus's forecast that central bank buying will slow 15% year-on-year to 720 metric tons in 2026. That's still well above pre-2022 levels, and it helps explain why gold has found support above $4,000.
Even if official purchases ease, the sheer volume remains a steady, structural source of demand. And because that demand is driven by reserve strategy rather than short-term yields, it can keep gold prices “floor-like” during periods when yields are rising. For investors who use gold as a hedge or who model gold's price based on real yields, this means the old assumptions may not hold as reliably.
“Gold can look more 'floor-like' during periods of heavy official buying,” the conference heard, and hedges that assume gold must drop when yields climb are more likely to disappoint.
That's not to say gold is immune to yield moves. If yields keep climbing, some investors will still shift money into bonds. But the central bank bid provides a cushion that wasn't there in previous cycles.
The bigger picture
The debate over gold's role in reserves is part of a broader conversation about the global financial system. With Treasury yields climbing and buyers facing asymmetric payoff, central banks are reassessing their portfolios. Gold offers a way to diversify away from any single currency or sovereign issuer.
For ordinary investors, the takeaway is that gold's price is no longer just a function of interest rates. Geopolitics, debt sustainability, and central bank behavior now play a bigger role. That makes gold a more complex asset to model, but also a potentially more resilient one.
As one official put it, gold is “the safe haven asset.” And in a world of elevated debt and fractured geopolitics, that status appears to be holding—even when yields are at their highest in decades.
