Gold Prices Surge: Are India and China Driving the Rally? Central Banks Step Up Buying

New Delhi: Gold prices continue their relentless upward trajectory, fueled not only by individual buyers and large investors but also by central banks across the world. The surge highlights that in times of economic and geopolitical uncertainty, gold remains a critical safe-haven asset.

India and China’s Strategic Shift

A significant factor behind the rising prices is increased gold purchases by the central banks of India and China. Both nations have reduced their investments in US Treasury bonds while boosting their gold holdings. This is not a short-term portfolio adjustment but a strategic shift in reserve management.

RBI’s Strategic Move

India’s foreign exchange reserves reflect a calculated policy by the Reserve Bank of India (RBI) to diversify away from US government debt. According to the US Treasury, India’s holdings in US Treasuries fell from $200 billion in September 2025 to around $190 billion by the end of October 2025, a decline of $50.7 billion from the previous year.

In contrast, India’s gold reserves rose to 880.18 metric tons by October 2025, up from 866.8 metric tons the previous year. This increase came even as India’s total foreign reserves remained stable at around $685 billion, indicating that gold’s share in reserves, rather than the overall reserves, was being boosted.

Gold Becomes a Key Component of Reserves

The growing proportion of gold is evident: as of 26 September 2025, 13.6% of India’s foreign exchange reserves were in gold, up significantly from 9.3% the previous year. This underscores that gold has become a central element of India’s reserve strategy, rather than a minor asset.

Global Trends

Meanwhile, countries such as the UK, Belgium, Japan, France, Canada, and UAE increased their US Treasury holdings. Japan remains the largest foreign holder at $1.2 trillion, followed by the UK and China. Conversely, China, Brazil, India, Hong Kong, and Saudi Arabia reduced their US Treasury investments year-on-year.

China’s reduction has been especially significant and politically sensitive. By November 2025, China’s holdings of US government debt fell to $682.6 billion, down from $688.7 billion in October, marking the lowest level since 2008 and signaling a prolonged shift away from US debt. According to official media, by the end of December 2025, China maintained the world’s largest foreign exchange reserves at $3.3579 trillion.

Conclusion

With central banks in India and China strategically increasing gold holdings, the global demand for the metal is strengthening, driving prices higher. The trend highlights gold’s ever-growing importance as a secure, strategic asset amid uncertain economic and geopolitical conditions.