U.S. Debt Faces New Test as India Turns to Gold
India has quietly trimmed its exposure to U.S. debt while accelerating its gold buying spree, underscoring how global reserves are shifting in response to geopolitical strains.
Bloomberg data shows the Reserve Bank of India reduced its U.S. Treasury holdings by nearly $8 billion between May and June, falling from $235.3 billion to $227.4 billion. The cutback coincides with heightened trade tensions between Washington and New Delhi following President Trump’s tariff push.
Gold Becomes the Preferred Hedge
At the same time, India’s central bank has stepped up gold acquisitions. RBI purchased 38.5 metric tons in July alone, bringing the nation’s holdings to 880 metric tons — a steady rise since sanctions on Russia in 2022 prompted countries to rethink dollar exposure. With foreign reserves topping $694 billion, India is increasingly diversifying away from dollar-denominated debt.
Broader Trend Among Developing Nations
Economists say India’s move reflects a wider recalibration across emerging markets. “If the U.S. can freeze Russia’s assets, it could happen elsewhere. Every central bank now wants a safety net,” noted Gaurav Kapur of IndusInd Bank. Several countries in Asia, the Middle East, and Africa have also been quietly cutting Treasuries while stockpiling gold.
Pressure on U.S. Debt Markets
If the trend accelerates, U.S. Treasury markets could face sustained pressure. The instruments have long been considered the world’s ultimate safe haven, but growing diversification leaves Washington more vulnerable to funding risks at a time of widening deficits.
India’s finance minister Nirmala Sitharaman described the central bank’s gold pivot as a “considered decision” that aligns with a broader strategy to safeguard the country’s reserves while maintaining flexibility amid uncertain global politics.
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