October 6, 2026
At the London Bullion Market Association's annual conference in Sorrento, Italy, representatives of the Banca d'Italia and the Deutsche Bundesbank reaffirmed on October 5 that gold remains strategically important for foreign exchange reserves - despite this year's surge in bond yields. For investors, this offers a rare glimpse into the considerations of the buyer group that has played a major role in shaping the gold market since 2022.
What Nagel and Altimari said in Sorrento
Sergio Nicoletti Altimari, Deputy Governor of the Banca d'Italia, described gold to conference attendees as a safe haven whose role has proven resilient across a broad range of crises. This is particularly relevant in an environment of heightened geopolitical risks and growing concerns about economic fragmentation, Reuters quoted him as saying.
Bundesbank President Joachim Nagel struck a different note: Rising yields increased the relative appeal of bonds for reserve managers. At the same time, there was still a strong case for diversifying into gold - because of persistent geopolitical pressure and the credit risk associated with high debt levels.
Both central bankers are thus describing the same tension from two different perspectives. Bonds once again offer meaningful coupon income; gold does not. Yet the very cause of higher yields - government debt - is also the argument for holding gold in reserve portfolios. For reserve managers, gold is not a yield-generating instrument, but a hedge against the default and devaluation risks in their own bond holdings.
Why the relationship between gold and real interest rates is weakening
The textbook rule is that when yields rise, the cost of holding a non-interest-bearing asset increases and the gold price declines. This pattern has worked only to a limited extent in 2026. According to Reuters, gold is down around 4 percent this year, while US Treasury yields have surged to multi-decade highs. However, analysts say central bank purchases and safe-haven demand have kept prices above US$4,000 per ounce.
Altimari attributes this to a structural shift since 2022, driven by purchases by emerging-market central banks. Concerns about high government debt and fiscal expansion have also played a role. Together, these factors have weakened the traditional inverse relationship between gold and real bond yields - particularly noticeably last year and at the beginning of this year.
This is relevant when assessing price movements: Anyone who evaluates the gold price solely on the basis of real interest rates is using a model that the central bankers involved themselves describe as having weakened. A price decline of around 4 percent amid sharply higher yields is comparatively moderate.
Central bank purchases: 720 tonnes expected, 15 percent less
Central bank demand is likely to ease in 2026 but remain at a high level. In its June forecast, consulting firm Metals Focus projected a 15 percent year-over-year decline to 720 metric tons in 2026. This would still be above levels seen before 2022.
This figure is the quantitative counterpart to the statements made in Sorrento. It shows that while official-sector demand is losing momentum, it is not returning to the previous norm. That makes a difference for the market: Central banks generally buy with less sensitivity to price and a longer time horizon than exchange-traded funds or futures market participants.
China: Bars and coins overtake jewelry for the first time
Zeng Hui, Vice President of the Shanghai Gold Exchange, described a second shift. He said the gold market had undergone profound changes in its demand structure and price discovery in recent years. In China, the world’s largest gold-consuming country, investment demand and institutional investors are increasingly driving the market.
In 2025, purchases of bars and coins there exceeded jewelry sales for the first time. Jewelry demand is typically sensitive to high prices, while investment demand tends to respond more to expectations regarding interest rates, currencies, and risk. If the balance shifts permanently toward investment, this will also change how demand responds to price increases.
What the new reserve logic means for investors
The message from Sorrento is not that gold is winning out over bonds. Rather, both sides of the same development - high government debt - favor different reserve assets. Nagel describes bonds as having become relatively more attractive while also viewing gold as prudent for risk management purposes.
For investors, the key takeaway is that official-sector demand, which has supported the market since 2022, is driven by security considerations rather than returns. As long as geopolitical risks and debt levels remain central to the debate over reserves, this component of demand will be less sensitive to interest rate movements than demand from private investors.
Source：https://goldinvest.de/en/central-bankers-gold-remains-reserve-asset-despite-high-bond-yields
