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Coming from the head of the world’s second-largest official gold holder, Nagel’s remarks reinforce the structural case that has kept gold above $4,000 despite multi-decade-high Treasury yields. Official-sector diversification, driven by sanctions risk and concerns over sovereign debt, is acting as a floor under prices even as rate expectations weigh on the metal. The Bank of Italy’s point that gold’s inverse link to real yields has weakened matters for traders. It suggests rate moves may hit gold less hard than history implies. The main counterweight is the Metals Focus forecast of slower central bank buying this year, which leaves gold more reliant on investment demand to recover. This week’s Fed minutes remain the near-term driver.
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Earlier:
- Oil is gold’s biggest enemy right now, Bank of America warns. Downside risk under $4000.
- Morgan Stanley’s Gower sees $4,000 as a strong floor for gold, cites three supports
- How to trade gold today as the gold futures market is very close to Friday’s close
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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 said the case for central banks to diversify further into gold remains significant, despite rising bond yields making government debt more attractive to reserve managers. He made the remarks at the London Bullion Market Association’s annual conference in Sorrento, Italy, on Monday.
Nagel pointed to continued geopolitical stress and the credit risk associated with high government debt levels as reasons to hold more of the metal, Kitco News and FXStreet reported. He said gold would play a significant role in central bank reserves.
A key part of his argument was the absence of counterparty risk. He 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 comments carry weight because of who made them. The Bundesbank holds more than 3,500 tonnes of gold, the second-largest official holding in the world.
Nagel acknowledged the challenge posed by higher yields, saying they make bonds relatively more attractive to reserve asset managers. With US Treasury yields at multi-decade highs, that tension is at the heart of the current gold market.
Other speakers at the conference struck a similar tone. Bank of Italy Deputy Governor Sergio Nicoletti Altimari described gold as arguably the safe haven asset. He said the market has undergone a structural shift since 2022, driven by emerging-market central bank buying. He added 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.
Not all the signals point the same way. Consultancy Metals Focus expects central bank gold demand to slow by about 15% this year, to around 720 tonnes.
Still, 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.
This article was written by Eamonn Sheridan at investinglive.com.
