Banca d’Italia’s latest assessment gives gold investors a reason to look beyond the next Federal Reserve decision. Speaking at the LBMA conference on October 5, Deputy Governor Sergio Nicoletti Altimari described a structural shift in gold demand since 2022, with emerging-market central banks playing a larger role and the traditional inverse relationship between gold and real yields weakening.
For us, the essential point is that gold’s investment case no longer rests solely on expectations of lower interest rates. Central banks are creating a demand base that can persist even in a less favorable interest-rate environment.
Higher yields still matter, but buyers are also considering reserve diversification, geopolitical exposure, and control over their assets. These motivations can endure through changes in the interest-rate cycle.
Gold Has More Than One Reason to Attract Buyers
In his published speech, Altimari identified several forces behind gold’s changing market: increased official-sector participation, geopolitical uncertainty, concerns about public debt and fiscal expansion, and greater access to gold through ETFs.
That breadth is encouraging. A market dependent on one catalyst can quickly lose buyers when conditions change. Gold serves several different purposes, each of which can become more relevant at a different time.
We see a stronger foundation when buyers seek diversification and greater reserve resilience alongside conventional price exposure. That means the investment case for gold can remain relevant even during periods when monetary policy is less favorable.
Higher Yields Still Compete With Gold
Tuesday’s advance accompanied a softer dollar and a decline in U.S. Treasury yields. The familiar opportunity-cost mechanism therefore remains relevant: lower yields on competing assets can make holding an asset that pays no interest more attractive.
However, the relationship between gold and real yields is only one part of the valuation picture. A reserve manager seeking protection against geopolitical risk may assess the same bond yield differently from an investor focused primarily on income.
Our constructive interpretation is that gold has a broader range of reasons to attract capital than a simple comparison with interest rates suggests. If interest-rate conditions become more favorable over time, they could complement these strategic motivations.
That may be the most significant change from previous cycles: high real yields still compete with gold, but they may no longer be sufficient to outweigh strategic demand.
Direct Ownership Has a Distinct Strategic Value
Altimari highlighted how the freezing of Russian foreign assets exposed the vulnerability of foreign-currency reserves held abroad. That experience also informs how reserve managers assess access to assets, jurisdiction, and control.
Physical gold held domestically does not depend on a foreign issuer fulfilling an obligation. This gives it a distinct role in a portfolio otherwise dominated by securities and bank deposits.
The central-bank accumulation trend therefore has a practical rationale. An institution may accept lower income from part of its reserves in exchange for diversifying the risks associated with financial claims.
For long-term holders, this is one of gold’s most persuasive qualities. The metal can meet an ownership and control objective that another yield-bearing instrument may not fulfill. Price fluctuations remain, but the reason for holding gold need not disappear simply because the next economic release changes interest-rate expectations.
August Purchases Show That Interest Is Translating Into Action
The World Gold Council’s October 6 update reports 39 tonnes of net central-bank purchases in August. China added 20 tonnes and Poland eight, while Russia sold six.
These figures cover August, rather than today’s trading session. They nevertheless confirm that major institutions continued adding gold, while showing that reserve decisions differ across countries.
We consider the persistence of buying more meaningful than the possibility of another monthly record. A strategic allocation program can generate recurring demand over time, even when individual transactions vary.
Continued purchases across several subsequent reporting periods would strengthen our confidence in this broader demand base. Official demand also represents the net balance of purchases and sales by individual institutions.
Gold’s Growing Reserve Share Requires Careful Interpretation
Bundesbank President Joachim Nagel added useful context in his October 5 keynote. The recent increase in gold’s share of global reserves was driven substantially by the rise in its price.
| Measure | Share of global reserves |
|---|---|
| Gold at market value, 2023 | Around 14% |
| Gold at market value, 2025 | Almost 25% |
| Hypothetical 2025 allocation using 2023 gold prices | Around 12% |
Source: Deutsche Bundesbank. The hypothetical calculation is an analytical scenario, not an observed reserve allocation.
Rising prices increase the value of metal already held, so a higher gold share cannot automatically be interpreted as evidence of new purchases. Nevertheless, Nagel described the case for further diversification into gold as significant, citing geopolitical risks and concerns associated with higher debt levels.
Time Horizon Matters for Gold
Gold’s strategic advantages are most meaningful when they match the needs of the holder. Reducing counterparty risk still leaves exposure to changes in market prices and the practical costs of ownership.
A July IMF staff study emphasizes that reserve managers should distinguish long-term investment holdings from assets needed for immediate liquidity. Its analysis concerns official reserve management, but the distinction illustrates why time horizon matters.
Silver requires a separate assessment. It can benefit from renewed investment interest in precious metals, but official gold purchases alone do not establish stronger silver demand. Its balance of industrial and investment demand requires its own evidence.
Strategic Demand Can Strengthen the Next Advance
We remain constructive on gold’s long-term role. Continued official purchases and the motivations described at the LBMA conference support the view that gold’s demand base now extends beyond short-term interest-rate expectations.
The strongest confirmation would combine continued central-bank accumulation with improving private investment demand, visible, for example, through changes in gold ETF holdings.
If central banks continue accumulating gold despite high real yields, that represents a meaningful change from a market that was previously much more sensitive to monetary policy. And if declining real yields and stronger private investment flows eventually join that strategic demand, gold could benefit from several favorable forces at once.
Gold does not need every buyer to share the same motivation. Its ability to meet several different needs is one reason the current structural shift is encouraging—and worth following through the next market cycle.
This commentary is for informational purposes only and does not constitute investment advice.
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