Gold Reserve Asset in a Changing Geopolitical Landscape
The comments below are an edited and abridged synopsis of an article by Professor Joachim Nagel, President of the Deutsche Bundesbank. Keynote speech at the Global Precious Metals Conference, Sorrento, Italy
Geopolitics is changing how central banks view the gold reserve asset. In a keynote speech at the Global Precious Metals Conference, Deutsche Bundesbank President Joachim Nagel explained how rising geopolitical risks are affecting economic growth, inflation, monetary policy and reserve management. He argued that a more fragmented world is increasing the need for diversification and resilience.
Nagel noted that geopolitical tensions can disrupt trade, supply chains and energy markets. Recent conflict and shipping disruptions have added pressure to energy prices and increased uncertainty. While the global economy has remained resilient, these shocks can make inflation more difficult to predict. For central banks, the key issue is whether an inflation shock is temporary or becomes persistent through higher business costs, wages and consumer prices.
The speech then turns to the gold reserve asset and its role in central bank portfolios. Central banks manage reserves with three goals in mind: liquidity, safety and return. Foreign exchange reserves are useful for liquidity and currency intervention. Physical gold offers a different benefit because it does not depend on an issuer or counterparty meeting a payment obligation. This makes gold a useful source of diversification during periods of financial or geopolitical stress.
Nagel traces gold’s changing role through three stages: anchor, retreat and return. After the Second World War, gold was a cornerstone of the international monetary system. Under Bretton Woods, currencies were linked to the US dollar, which was convertible into gold. Over the following decades, gold became less important as globalization expanded and government securities offered attractive yields.
That trend began to reverse after the global financial crisis. Lower interest rates reduced the opportunity cost of holding gold, while geopolitical risks became more prominent. Central banks, including those in China and Russia, returned as significant gold buyers. Concerns about financial sanctions also added to demand because foreign securities and deposits can potentially be frozen, while domestically held physical gold is not subject to the same risk.
The gold reserve asset has gained further importance in recent years. Nagel notes that gold’s share of global reserves rose from 10% in 2009 to about 14% in 2023. From 2023 to 2025, its share rose to almost 25%, although much of that increase reflected higher gold prices.
Looking ahead, higher government bond yields may make debt securities more attractive again. However, rising government debt also raises questions about credit risk. In Nagel’s view, continued geopolitical uncertainty means the case for diversification into gold remains significant.
The broader message is clear: Gold’s role is not based only on its price. Its value to central banks also comes from its independence from an issuer and its potential to strengthen reserve resilience when the global economic and political landscape becomes less predictable. For investors, the speech offers a useful reminder: Short-term price movements do not tell the whole story. The strategic role of physical gold can extend beyond market cycles, particularly when confidence in traditional reserve assets is tested by debt, sanctions, inflation or geopolitical change.
Nagel’s comments reinforce why gold continues to warrant attention—not just as a commodity, but as a strategic asset within the global financial system.
