Gold Reserve Asset: Why Central Banks Still Hold Gold
The comments below are an edited and abridged synopsis of an article by Polina Devitt
What is a gold reserve asset? A gold reserve asset is physical gold held as part of a central bank’s official reserves. Gold can provide diversification, liquidity and resilience without relying on the credit of another issuer. Its role has gained renewed attention as central banks respond to geopolitical risk, high government debt and a more fragmented global economy.
Gold remains a key gold reserve asset even as government bond yields rise. Speaking at the London Bullion Market Association’s Global Precious Metals Conference in Sorrento, Italy, central bankers highlighted the continuing strategic role of gold in official reserves. Their comments show that central bank gold is increasingly considered not simply a commodity, but a strategic asset within reserve management.
Gold can face pressure when bond yields rise because it does not pay interest. Higher yields increase the opportunity cost of holding a non-yielding asset. Yet gold has remained relatively well supported in 2026. Reuters reported that gold was down about 4% at the time of the conference but remained above $4,000 an ounce, supported by central bank purchases and safe-haven demand.
Sergio Nicoletti Altimari, deputy governor of the Bank of Italy, described gold as a safe-haven asset whose role is particularly relevant amid geopolitical risk and economic fragmentation. He also noted that concerns about high public debt and continued fiscal expansion have contributed to a weakening of the traditional relationship between gold and real bond yields.
Bundesbank President Joachim Nagel similarly highlighted the changing role of gold in central bank reserves. While higher yields can make government bonds more attractive to reserve managers, he said the case for diversification into gold remains significant. Gold’s physical nature also gives it characteristics that differ from financial securities, including the absence of direct counterparty risk.
The market for central bank gold has changed significantly since 2022. Purchases by emerging-market central banks have become an important source of demand. Metals Focus expects central bank gold demand to decline by 15% year over year in 2026 to approximately 720 tonnes. Even with that decline, demand is expected to remain above levels recorded before 2022.
China provides another example of the changing demand structure. The Shanghai Gold Exchange reported that investment demand and institutional participation are becoming increasingly important. In 2025, bar and coin purchases surpassed jewelry consumption for the first time, highlighting the growing investment role of physical gold.
For investors, the distinction between gold’s market price and its strategic role is important. Rising bond yields can create short-term headwinds, and price fluctuations are a normal part of any market. However, the purpose of gold within a reserve portfolio extends beyond its latest price. Central banks can use gold reserves as part of a broader diversification strategy designed to support liquidity, security and resilience during periods of financial or geopolitical stress.
The broader trend suggests that the gold reserve asset remains strategically relevant. For central banks, physical gold can complement bonds and other reserve holdings rather than simply compete with them. As government debt rises and geopolitical relationships become more complex, gold’s role as a strategic reserve asset may remain an important consideration for reserve managers.
