SORRENTO, Italy, October 05, 2026 (DAILYNWZ) — Gold remains a key reserve asset despite a sharp rise in bond yields, with concerns over government debt and geopolitical instability sustaining demand for the precious metal as a haven, two central bankers said on Monday.
Gold typically loses appeal when bond yields rise because it does not generate interest, increasing the opportunity cost for investors holding it instead of interest-bearing assets.
Yet the relationship has weakened this year. Gold prices are down about 4% as U.S. Treasury yields have climbed to multi-decade highs, but prices have remained above $4,000 an ounce, supported by central-bank purchases and demand for protection against risk, analysts say.
“Gold is a safe haven asset, probably the safe haven asset, as proven by its performance over time and across a broad range of crises,” Sergio Nicoletti Altimari, deputy governor of the Bank of Italy, told the London Bullion Market Association’s annual conference in Sorrento.
“This role is particularly relevant today in an environment of high geopolitical risk and concerns about economic fragmentation,” he said.
Bundesbank President Joachim Nagel said higher yields were making bonds relatively more attractive to managers of official reserves. But he said diversification into gold remained important because of persistent geopolitical tensions and the credit risks associated with high government debt.
The shift in gold demand has become more visible since 2022, according to Altimari, as central banks in emerging economies increased their purchases.
Consultancy Metals Focus expects central-bank gold demand to fall 15% this year to 720 metric tons, based on its June forecast. Even at that level, demand would remain above pre-2022 levels.
Altimari said concerns over elevated public debt and increased government spending had also supported gold demand, weakening the metal’s traditional inverse relationship with real bond yields.
“These forces became particularly evident last year and early this year when the traditional relationship between gold and real yields weakened significantly,” he said.
The change is also reshaping demand in major gold markets. Shanghai Gold Exchange Vice President Zeng Hui said the market had undergone “profound shifts” in its demand structure and pricing framework in recent years.
In China, the world’s largest gold consumer, investment demand and institutional participation are increasingly driving the market, Zeng said. Purchases of gold bars and coins exceeded jewellery consumption for the first time in 2025, he added.
The developments suggest that higher yields alone are no longer enough to undermine gold’s appeal as a reserve asset, as central banks weigh the diversification benefits of holding gold against concerns about debt, geopolitical risk and the broader global economic landscape.