Gold Overtakes US Treasuries as Top Reserve Asset Amid Global Diversification Push

• Gold has surpassed US Treasuries in global reserve asset rankings.

• India cut US Treasury holdings 22.5% to $181 billion (April 2026).

• RBI gold reserves rose to about 881 tonnes; 77% now held domestically.

• Central banks average 1,000 tonnes annual gold purchases.

• Dollar remains dominant but gradual diversification is underway.

Gold has moved ahead of US Treasuries to become the world’s largest reserve asset, buoyed by rising bullion prices and a shifting geopolitical landscape that is prompting central banks to rethink reserve strategies.

Beyond price gains, the renewed appeal of gold reflects deeper structural changes in the global financial order. In a world shaped by geopolitical tensions and evolving trade alignments, central banks are increasingly treating gold not merely as an inflation hedge but as a core reserve asset and safeguard against external shocks.

Central Banks Double Down on Bullion

According to the World Gold Council (WGC), central banks have purchased an average of 1,000 tonnes of gold annually over the past four years — double the 500-tonne average seen in the previous decade. This steady accumulation signals a broader move toward diversifying away from dollar-denominated assets.

India is among the countries leading this shift. Data from the US Federal Reserve shows that India’s holdings of US Treasuries declined 22.5%, falling from $232 billion in April 2025 to $181 billion in April 2026 — the lowest level in six years. At the same time, the Reserve Bank of India (RBI) has significantly increased gold purchases.

India’s gold reserves have climbed from 658 metric tonnes six years ago to roughly 881 metric tonnes currently, marking a rise of nearly 34%. The rebalancing underscores a global trend of reducing dependence on US government debt instruments while boosting allocations to physical bullion.

China has also trimmed its Treasury exposure. Between April 2025 and April 2026, its holdings dropped from $743.6 billion to $651.1 billion — a 12.44% decline. Reports suggest Chinese authorities have encouraged banks to lower exposure to Treasuries as part of a broader risk diversification strategy.

Bringing Gold Back Home

In addition to buying more gold, India has repatriated a substantial share of its overseas bullion. RBI data indicates that more than 100 tonnes were brought back between October 2025 and March 2026, following the return of 280 tonnes during 2023–2025.

By March 2026, India held 880.52 tonnes of gold, of which 680.05 tonnes — about 77% — were stored domestically. Just three years earlier, only 38% of India’s gold was kept within the country. Analysts say holding gold at home enhances security, reduces storage costs, and limits exposure to potential geopolitical disruptions.

The freezing of Russian assets after the Ukraine conflict has reinforced concerns among central banks about the vulnerability of foreign-held reserves. Gold, which is not issued by any country, is viewed as immune to such risks.

Why Gold, Why Now?

Economists argue that gold’s neutrality makes it uniquely attractive. Unlike sovereign bonds, its value is not directly influenced by the fiscal or monetary policies of any one government. Moreover, physical gold can be mobilised in times of emergency to finance critical imports.

Survey findings from the WGC show strong bullish sentiment among central banks: 89% expect global gold reserves to increase over the next 12 months, while about 45% anticipate raising their own holdings. Additionally, 74% believe the share of US dollar holdings in global reserves will decline moderately or significantly over the next five years.

An European Central Bank report notes that gold accounted for 27% of global central bank reserves at the end of 2025, up from 20% a year earlier. During the same period, the share of US Treasuries slipped from 25% to 22%. Still, dollar-denominated assets continue to dominate global reserves at 42%.

De-dollarization or Diversification?

Despite the growing tilt toward gold, experts caution against predicting a rapid erosion of dollar supremacy. The US dollar index has strengthened in recent months amid safe-haven demand and higher oil prices, while gold has retreated from record highs.

Analysts suggest that what is unfolding is not abrupt de-dollarization but a gradual recalibration of reserve portfolios. The dollar remains central to global trade and finance, with no immediate replacement in sight.

For now, the world appears to be entering a phase of cautious diversification rather than wholesale currency realignment. India and China are at the forefront of this trend, adjusting reserve compositions to navigate an increasingly uncertain global environment.

If the pattern continues, the long-term implications could reshape how central banks manage reserves — but the transformation, experts say, will be evolutionary, not revolutionary.