(Kitco News) - For the last four years, central bank demand has transformed the gold market, providing a critical pillar of support for prices. Even if official demand continues to slow, reserve managers are increasingly viewing the precious metal as a strategic asset that can protect against geopolitical uncertainty, financial market instability and declining confidence in traditional reserve assets.
Speaking during a panel on central banks at the London Bullion Market Association’s annual Precious Metals Conference, reserve managers from Europe, Africa and Latin America said gold’s role has expanded well beyond a simple inflation hedge or store of value.
The comments suggest that even after gold’s historic rally, central bank demand could remain an important structural pillar for the precious metal.
Massimiliano Castelli, Managing Director and Head of Strategy for Sovereign Institutions at UBS Asset Management and the panel moderator, said results from the firm’s latest Reserve Management Survey show that gold remains the preferred strategic hedge among reserve managers.
According to the survey, 65% of respondents said diversification was their primary reason for owning gold in 2026, followed by geopolitical risk management. Gold also remained one of the assets central banks expect to add to their reserves during the next 12 months, alongside euro- and renminbi-denominated assets.
The survey results point to an important evolution in central bank demand. While geopolitical uncertainty remains a major consideration, gold is increasingly being incorporated into broader strategic asset allocation decisions.
Tomasz Malkowski, Chief Dealer of FX and Gold at Narodowy Bank Polski, said central banks should not look at gold through the lens of short-term price movements.
“I think it is a pillar of stability, country stability in the eyes of investors, and it is an anchor during financial markets turbulences,” he said.
Malkowski noted that gold carries no conventional credit risk and said Poland views the metal as a strategic holding over a much longer time horizon.
Poland has emerged as one of the world’s most aggressive official-sector gold buyers. The central bank began actively accumulating gold in 2018, when it held roughly 100 tonnes, representing about 5% of its reserves. Its current objective is to increase its holdings to 700 tonnes.
However, Malkowski emphasized that Poland’s gold purchases are not intended to replace its holdings of euros or U.S. dollars.
“Rather, it is to create a more diversified reserve structure,” he said.
Malkowski added that geopolitical instability has become an increasingly important consideration for reserve managers, particularly following Russia’s invasion of Ukraine in 2022.
He said geopolitical uncertainty and broader financial risks have become more prominent factors in reserve management decisions than inflation alone.
“For us, particularly as Poland, obviously we have had on our border open conflict in Ukraine since the Russia invasion of Ukraine in 2022,” he said. “I think that geopolitical uncertainty is the number one concern amongst all of the central banks, including us.”
While Poland represents a new generation of aggressive central bank buyers, Banca d’Italia highlighted why some of the world’s largest historical gold holders remain reluctant to sell.
Gioia Cellai, Deputy Director General for Markets and Monetary Policy Operations at Banca d’Italia, said gold has repeatedly demonstrated its usefulness during periods of extreme economic and political stress.
Italy currently holds roughly 2,450 tonnes of gold. Cellai said the metal has historically helped establish confidence in the central bank and the currency, acted as a safe-haven asset during periods of crisis and provided collateral when liquidity was urgently needed.
She explained that during Italy’s financial difficulties in 1974, the country pledged 500 tonnes of gold to Germany’s Bundesbank in exchange for a $2 billion loan.
“Gold is an asset that you can always pledge with the official sector, especially in rainy days,” she said.
Cellai said gold continues to provide significant diversification benefits on Banca d’Italia’s balance sheet.
“It’s a powerful diversifier. It’s a powerful safe haven,” she said.
Banca d’Italia incorporates gold into its strategic asset allocation framework even though it does not actively target a specific allocation. Cellai noted that the value of its gold holdings has grown sharply as prices have risen, bringing gold back to roughly 30% of the central bank’s assets in 2025.
For emerging-market central banks, gold can play an even more direct role in strengthening economic resilience.
Gershon Agbledzorwu, Head of Financial Markets at the Bank of Ghana, said the country launched its Domestic Gold Purchase Program in June 2021 after recognizing that one of Africa’s largest gold producers had failed to translate its mineral wealth into stronger monetary reserves.
The program allows the central bank to purchase domestically produced gold using local currency.
“In 2022 we purchased about 3.47 tonnes; in 2023, about 37; 2024, about 56 and then in 2025, about 110 tonnes of gold as a result of this. So that has really helped us, and it has translated into some economic benefits for the country as well,” he said.
Ghana now plans to go even further. Agbledzorwu said the government and central bank have reached an agreement with large-scale miners to purchase 30% of their production, which is expected to add about 30 tonnes of gold annually.
“For us, gold is more than a diversification,” he said.
He described the strategy as converting a finite natural resource into enduring national wealth while strengthening the country’s ability to withstand external economic shocks.
“And we saw our currency also became strong, uh, which also has a, a very significant pass-through to inflation. Inflation naturally dropped from about twenty-four percent, uh, in twenty twenty-four to, uh, five point four percent in twenty twenty-five,” he said.
Along with diversification and financial stability, the panel also addressed one of the increasingly important arguments supporting official sector gold demand: gold is no one else’s liability.
Cellai said this characteristic has become particularly important in a world where reserve managers are increasingly conscious of geopolitical fragmentation and sanctions risk.
“What I see right now is that two properties of gold make it particularly attractive as a reserve asset. And first one, it’s no one’s liability,” she said.
She added that Russia’s experience following the freezing of foreign reserves has reinforced gold’s appeal because physical bullion can be stored domestically and is perceived as less vulnerable to sanctions.
“Gold is something physical that you can store in your vaults,” she said. “And so it’s perceived as somehow less exposed to sanctions or friends becoming enemies.”
That does not necessarily mean central banks are abandoning the U.S. dollar.
Castelli described the current debate around de-dollarization as “dissatisfaction without displacement,” noting that despite concerns surrounding the dollar-based monetary system, there has not yet been a dramatic wholesale movement out of U.S. Treasuries.
Instead, gold appears to be benefiting as central banks gradually diversify around their traditional reserve holdings.
It’s not just central banks that are bullish on official sector demand. The audience at the LBMA conference overwhelmingly expected this trend to continue. In a poll asking how central bank gold purchases would evolve during the next five years, nearly 90% of respondents expected buying either to accelerate or continue broadly around current levels.
Cellai said she would position herself between the two outcomes.
Castelli also said he expects central banks to remain net buyers, although the pace of future purchases remains difficult to predict. The panelists argued that gold’s strategic role should not be judged simply by whether prices rise or fall over the next quarter.
Henk Janse van Vuuren, Senior Manager at the South African Reserve Bank, said gold’s usefulness becomes particularly apparent during tail-risk events — precisely the periods that traditional portfolio models struggle to capture.
Malkowski similarly said central banks operate under a fundamentally different mandate than traditional investors. Their objective, he said, is to preserve the strength and credibility of national reserves over a much longer horizon.
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