Among the most notable players in this shift are India and China. Both countries have been steadily reducing their exposure to US Treasuries while simultaneously increasing gold holdings, indicating a deeper rebalancing of reserve management strategies rather than short-term portfolio adjustments.
RBI’s strategic shift
India’s evolving reserve composition reflects a deliberate policy choice by the Reserve Bank of India (RBI) to diversify away from US government debt. Data released by the US Department of the Treasury shows that India’s holdings of US Treasuries fell below the $200 billion mark, declining to around $190 billion by the end of October 2025. This represents a sharp drop of $50.7 billion compared with the same period a year earlier.
During this time, the RBI moved decisively in the opposite direction with respect to gold. According to RBI data, the central bank’s gold holdings rose to 880.18 metric tonnes at the end of October 2025, up from 866.8 metric tonnes a year earlier. Notably, this increase occurred even as India’s total foreign exchange reserves remained broadly stable at around $685 billion, suggesting a reallocation within the reserve basket rather than an overall expansion.
This shift is evident in gold’s growing share of India’s reserves. As of September 26, gold accounted for 13.6% of RBI’s forex reserves, up sharply from 9.3% a year earlier, when total reserves were at a record high. The rising proportion highlights how gold has become central to India’s reserve strategy rather than a marginal asset.
The bet behind India’s move
Economists argue that the RBI’s decision is rooted in risk management rather than ideology. Gaura Sengupta, chief economist at IDFC First Bank, has told ET, “India’s lower holdings of US Treasury bills reflect the RBI’s push to diversify its foreign exchange reserves by buying more gold.” She added that rising fiscal pressures in advanced economies have pushed up global bond yields, increasing the risk of valuation losses on reserves held in Treasuries.According to Sengupta, “To limit this risk, central banks, including the RBI, are shifting part of their reserves away from US Treasuries and towards gold.” In an environment of volatile interest rates and ballooning sovereign debt in developed markets, gold offers insulation from mark-to-market losses that fixed-income securities are increasingly vulnerable to.
A global divide in treasury holdings
India’s actions are part of a broader global divergence in how countries manage exposure to US government debt. US Treasury data shows that while total foreign investments in US Treasury bills stood at $9.24 trillion at the end of October 2025, the distribution of those holdings has shifted. Countries such as the United Kingdom, Belgium, Japan, France, Canada, and the UAE have increased their exposure to US Treasuries. Japan remains the largest foreign holder, with $1.2 trillion, followed by the UK and China. In contrast, China, Brazil, India, Hong Kong, and Saudi Arabia have reduced their holdings on a year-on-year basis.
This pattern suggests that geopolitical alignment, risk tolerance and domestic reserve priorities are increasingly shaping how countries view US debt, rather than a uniform faith in Treasuries as the world’s ultimate safe asset.
China’s long retreat from US debt
China’s drawdown of US Treasuries has been even more pronounced and politically charged. According to data released by the US Department of the Treasury as reported by PTI, China’s holdings of US government debt fell to $682.6 billion in November 2025, down from $688.7 billion in October. This marked the lowest level since 2008, underscoring a long-running and steady retreat.
The reduction came even as overall foreign ownership of US debt touched a record high, with US allies stepping in to fill the gap. Japan increased its holdings by $2.6 billion to $1.2 trillion, while the UK boosted its exposure by $10.6 billion to $888.5 billion during the same period.
Analysts view China’s continued trimming of US debt as part of a broader strategy to reconfigure its vast reserve pool. China currently holds the world’s largest foreign exchange reserves, totalling $3.3579 trillion at the end of December 2025, according to official media.
Diversification, geopolitics and debt sustainability
Chinese economists have framed the move as a technical optimisation exercise, though geopolitical considerations loom large. Xi Junyang, professor at the Shanghai University of Finance and Economics, told the state-run Global Times that “the decrease in China’s holdings of the US treasuries is a result of increased optimisation and diversification of holdings of foreign assets seen in recent years, which helps strengthen the overall safety and stability of the portfolio.”
Others have been more blunt. Shao Yu, chief economist at the Sci-tech Innovation Management Research Centre at Fudan University, said Beijing appeared determined to further reduce exposure to US debt as fiscal risks mount. “The massive accumulation of debt resembles a Ponzi scheme, where larger volumes of new debt are used to replace the old. China doesn’t want to play this game anymore,” he told the South China Morning Post.
These comments reflect deep unease in China about the long-term sustainability of American public debt, particularly in an era of rising interest rates and intensifying strategic rivalry with the US.
Parallel to the drawdown in US Treasuries, China has been methodically building up its gold reserves. Latest figures from the People’s Bank of China show that gold reserves rose to 74.15 million ounces by the end of December 2025, up by 30,000 ounces from the previous month. This marked the 14th consecutive month of gold accumulation by the central bank.
Xi Junyang noted that the central bank is likely to continue increasing gold holdings as part of efforts to strengthen reserve stability and improve resilience against global volatility. He also pointed out that gold still constitutes a relatively smaller share of China’s total reserves compared with other major economies, leaving ample room for further accumulation.
For China, gold serves not only as a hedge against financial instability but also as a buffer against sanctions risk and currency weaponisation, concerns that have grown as geopolitical tensions with the US persist.
A structural shift, not a tactical trade
What unites India and China’s strategies is the recognition that the global financial order is entering a more fragmented and uncertain phase. Rising fiscal stress in advanced economies, volatile bond markets and geopolitical fault lines have weakened the once-unquestioned status of US Treasuries as the ultimate risk-free asset. Gold, by contrast, carries no default risk, is no one’s liability and has historically retained value during crises. The continued accumulation of gold by central banks despite record-high prices suggests that these moves are structural rather than opportunistic.
For India and China, dumping US Treasuries and buying gold is less about betting against the dollar in the short term and more about building resilience for an unpredictable future. As central banks quietly rebalance their portfolios, the sustained bid for gold may well prove to be one of the defining financial trends of this decade.
