India’s Shift Toward Gold Signals a Broader Rethink of Dollar Dependence

Tensions between India and Western nations over Russian oil took a new turn after reports emerged that New Delhi has been increasing purchases of assets largely unaffected by Western sanctions—most notably gold.

According to a Russian news agency, India bought gold worth more than $5 billion from Russia during the first ten months of last year. At the same time, India has begun repatriating gold held overseas and reducing its exposure to US Treasury bonds.

This strategic shift has drawn attention because US Treasuries have long been regarded as the world’s safest investment and a cornerstone of global financial stability. For decades, they symbolised trust in the US dollar and were the preferred reserve asset for central banks worldwide. Gold traditionally ranked second.

That balance, however, appears to be changing. For the first time in nearly 30 years, global central banks now reportedly hold more gold than US Treasury bonds. Central bank gold reserves worldwide are estimated at around $4.5 trillion, compared with approximately $3.5 trillion in US Treasuries—an indication of a gradual erosion of confidence in dollar-denominated assets.

Analysts trace this shift to a critical turning point in February 2022, when the Russia–Ukraine war began. Shortly thereafter, Western countries announced the freezing of nearly $300 billion of Russia’s foreign exchange reserves held abroad. The move sent shockwaves through global financial circles, prompting several countries to reassess the risks of holding reserves in assets vulnerable to geopolitical sanctions.

For major economies such as India and China, the episode underscored the potential dangers of excessive dependence on the US dollar. Concerns grew that financial instruments could increasingly be used as tools of geopolitical pressure.

In response, Russia has reportedly doubled its gold reserves over recent years, while India has stepped up gold purchases, brought back gold stored in foreign banks, and trimmed its holdings of US Treasuries. The underlying logic is straightforward: while currencies and bonds may be exposed to political risk, gold remains largely immune to sanctions and geopolitical disputes.

India’s evolving reserve strategy, alongside similar moves by other countries, reflects a broader and quieter recalibration of the global financial system—one in which gold is regaining prominence and unquestioned reliance on the US dollar is gradually being reassessed.