China's strategic shift towards gold accumulation, contrasted with India's more cautious approach, reflects differing economic priorities and long-term geopolitical strategies. China's "all in" approach signals a move to reduce reliance on the U.S. dollar and hedge against global economic instability, while India's policies, though also including gold purchases, are influenced by concerns about trade deficits and managing domestic demand.
China's increasing demand for gold is driven by several factors. One primary reason is the desire to reduce dependence on the U.S. dollar. By increasing its gold reserves, China aims to protect itself from dollar volatility and potential geopolitical risks. This strategy aligns with a broader trend among BRICS nations to minimize reliance on the U.S. dollar in international trade and financial transactions. China has also been reducing its holdings of U.S. Treasury bonds, further indicating a shift away from dollar-based assets.
Economic security is another key driver. Gold is viewed as a safe-haven asset that retains its value during economic downturns. By accumulating gold, China aims to secure its economy against inflation, currency devaluation, and global financial uncertainty. This is particularly important given the ongoing geopolitical tensions and economic slowdowns in major economies. Moreover, China is pushing for the renminbi to become a major global currency. Increased gold reserves can enhance confidence in the renminbi, supporting its international role.
The People's Bank of China (PBOC) has been steadily increasing its gold reserves. By early 2025, China's official gold holdings had risen to 2,292.31 tonnes. This continuous expansion, even after a six-month pause, underscores China's commitment to this strategy. The PBOC's actions also positively influence local gold investors, further boosting demand. China's gold imports in 2024 totaled $103 billion, making gold the fourth most imported product. The main origins of these imports were Switzerland, Canada, and Hong Kong.
In contrast, India's gold policies are more nuanced. While India also recognizes the importance of gold, its approach is shaped by different economic considerations. India's gold imports increased by 5% to 802.8 tonnes in 2024, driven by strong investment demand and purchases by the Reserve Bank of India (RBI). However, high prices have dampened jewelry demand. The RBI has been actively adding to its gold reserves, holding 879.6 tonnes, which is 11.7% of its total foreign exchange reserves, and the highest level in both quantum and share.
Despite these increases, India's gold policies remain cautious due to concerns about the trade deficit. Gold imports contribute significantly to India's current account deficit (CAD), as India is one of the largest gold importers. High gold imports lead to a substantial outflow of foreign exchange, putting pressure on the Indian rupee and potentially destabilizing the economy. To manage this, the Indian government has implemented various measures, including import duties and restrictions on gold sales by banks. These policies aim to curb excessive gold imports and promote the re-export of gold after value addition, such as turning gold bricks into jewelry.
While China's strategy appears geared towards long-term economic and geopolitical goals, India's approach balances the desire for secure reserves with the need to manage its trade balance and currency stability.
