India and China Shift Focus: Increasing Gold Reserves While Reducing US Treasuries Holdings

India’s holdings of US Treasuries have significantly declined, dropping from $232 billion in April 2025 to $181 billion in April 2026, marking a 22.5% decrease. This reduction has brought India’s Treasury holdings to a six-year low. In contrast, gold has emerged as the world’s largest reserve asset, driven by rising bullion prices and a growing perception of gold as a safe haven amid geopolitical tensions.

Shift in Reserve Assets

Central banks globally are increasingly viewing gold as a hedge against inflation and a core store of value. A recent report from the World Gold Council indicates that central banks have purchased an average of 1,000 tonnes of gold annually over the past four years, doubling the average of 500 tonnes from the previous decade. India is among the major economies ramping up gold purchases while reducing its exposure to US Treasuries.

India’s gold reserves have risen from 658 metric tonnes six years ago to approximately 881 metric tonnes today, reflecting a 33.9% increase. This shift from US Treasuries to gold aligns with a broader global trend of reducing dependency on dollar-denominated assets. Concurrently, India is working to internationalize the rupee through trade settlements and currency agreements with various countries.

Domestic Gold Reserves on the Rise

India is also repatriating a significant portion of its gold holdings from abroad. Between October 2025 and March 2026, over 100 metric tonnes of gold were brought back, following the return of 280 tonnes from 2023 to 2025. The Reserve Bank of India (RBI) now holds around 880.52 tonnes of gold, with 680.05 tonnes stored domestically. The percentage of gold reserves held in India has increased from 38% to 77% over three years.

Experts suggest that storing gold domestically enhances security and reduces vulnerability to external risks. The decision to bring back gold reserves is seen as a strategic move to safeguard against geopolitical uncertainties and potential asset freezes.

Gold’s Role in Foreign Exchange Reserves

Gold’s appeal as a reserve asset stems from its universal value, independent of any single country. The ongoing geopolitical tensions, particularly the Russia-Ukraine conflict, have highlighted the risks associated with assets held in foreign currencies. The freezing of Russian assets has prompted countries to consider gold as a safer alternative.

Madan Sabnavis, Chief Economist at Bank of Baroda, notes that gold’s independence from national control gives it an advantage over other currencies. The need for diversified foreign exchange reserves has been emphasized by recent geopolitical events, leading central banks to increase their gold holdings as a safeguard against potential liquidity issues.

Trends in Global Reserve Holdings

Central banks are expected to continue increasing their gold holdings in the coming years. According to a World Gold Council survey, 89% of central banks anticipate raising their gold reserves within the next 12 months. Additionally, 74% of respondents foresee a decrease in US dollar holdings within global reserves over the next five years.

Despite the growing interest in gold, the US dollar remains dominant in global reserves, accounting for 42% of the total. While some countries, like Japan and the UK, have increased their Treasury holdings, the overall trend indicates a gradual diversification away from dollar-denominated assets.

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