De-Dollarization Accelerates in 2025: India Dumps U.S. Treasuries as Tensions With the US Rise

Welcome back everyone. Thank you so much for joining me today. We are now in the third quarter of 2025 and foreign holders of U.S. debt continue to sell dollar-denominated holdings. I've covered China selling U.S. treasuries that now stand at a record low before in great detail and today let's talk about India. India is a very interesting case for several reasons, primarily because for several decades India has been U.S. security partner in the Asia-Pacific region. It has maintained very close ties with the United States and now India appears to be following China's example and accelerating sale of U.S. debt. India is one of the world's largest economies and foreign exchange holders. For decades U.S. treasury bills, long seen as the gold standard of safe assets, formed the bedrock of many nations forex reserves but that bedrock is now starting to show cracks. According to fresh data from the Reserve Bank of India and the United States Treasury Department, India's holdings of U.S. treasuries have declined to 227 billion dollars as of June 2025, the end of the second quarter of this year. That is down from 242 billion dollars just a year earlier. While this may seem like a modest adjustment, not a big deal, nothing to write home about on the surface, but it is the direction, it is the direction not the size of the change that's raising eyebrows. So again it's the trend that's important here. This move doesn't exist in isolation, it mirrors a broader more cautious readjustment across central banks globally, one that speaks volumes about confidence in the U.S. dollar and its long-term role in the world economy. For the United States this is something to pay very very close attention to because the strength of the U.S. dollar, the global demand for the dollar, those are crucial things for the U.S. economy. India's reduction in treasuries is accompanied by something else, a growing interest in safe haven assets such as gold. Gold is one of them. In the same 12-month window the Reserve Bank of India added over 39 metric tons of gold to its reserves. By late June 2025 according to the reports, India's gold holdings had increased to nearly 880 tons. This is an increase from just under 841 tons a year earlier. That is one of the largest single year increases in recent memory. This is very very big. So why are central banks buying gold right now? Well the answer lies in two very simple words, risk and resilience. I do want to say here that it does not mean that individual investors should rush to buy gold right now. That is not what I'm saying, not at all. In fact remember that the risk tolerance of central banks and private financial institutions is very different from yours and mine. So none of this means that individual investors should now follow suit and go buy gold if their finances are not in order otherwise. Over the last two years the dollar has weakened considerably. It lost about 40 percent of its value against gold. That's an alarming figure especially for institutions that are charged with safeguarding national wealth. Central banks by design are conservative. They don't chase trends. They hedge against storms and right now they're preparing for what many believe could be a prolonged era of currency volatility and fiscal uncertainty in the United States. India's decision to trim its exposure to dollar denominated debt is not a vote of no confidence in the U.S. economy per se. Rather I would say that this is a strategic move to diversify, to avoid putting too many eggs in one increasingly unstable basket if you will. Despite the treasury sell-off, India's overall foreign exchange reserves total around 690 billion dollars as of August of 2025 and in fact India still ranks among the top 20 investors in U.S. debt and that outpaces countries like Saudi Arabia and Germany which appear to be close allies of the United States. So make no mistake the dollar hasn't been abandoned. Rather it is simply being diluted and India is not alone by the way. China, the third largest holder of U.S. treasuries, has also been cutting back. Beijing reduced its holdings to 757 billion dollars in June 2025. That is a decrease from 780 billion dollars the year before. That may not sound like much but again the trend is what matters. It is a signal. In contrast countries like Israel have moved the other way. They increased their U.S. bond exposure and of course we know why but this divergence only reinforces the sense that a broader realignment is now taking place and it is driven by different geopolitical strategies, different goals and of course different economic forecasts for these countries. At the center of this shift is a hard truth however. The U.S. dollar's supremacy is no longer a given. For decades the greenback has served as the world's default reserve currency, a pillar of global finance backed by the stability of the U.S. economy and the perceived safety of its government debt. But in recent years that perception has begun to erode. Ballooning U.S. deficits, political polarization and aggressive monetary policy have raised doubts among reserve managers across the globe. New York Fed custody data which is considered among the most real-time indicators of foreign central bank behavior, it shows that holdings of treasuries and other U.S. securities by foreign central banks have dropped to 2.8 trillion dollars. That is the lowest since January of this year and the largest weekly drop this year. Including other forms of U.S. debt the total fell to just over 3.2 trillion dollars, again the lowest level since 2017. And this is not just noise, that's one of the biggest red flags this year. This is something to be aware of. What's more telling is what's happening after these bonds mature. Traditionally foreign central banks would reinvest that cash or park it in overnight reverse repo facilities at the Fed but now they're doing something else. Many aren't even reinvesting it back in reverse repo facilities. Their cash balances at the Fed are dropping too. So then you have to ask well where's that money going? Well it goes back into safe haven assets and into other currencies and I want to underscore it. It goes back into safe haven assets such as gold and into other currencies, into sovereign wealth funds, into a diversified multi-asset world where the dollar is no longer that single sun around which everything orbits. So as you can see it is not just gold. The entire point is to diversify, not to put all of your eggs into one basket again where whether it is United States dollar or gold you need to diversify. You can't just rely solely on one single asset class. The trend is certainly hinting at de-dollarization of course as much as it is signaling global strategic repositioning, a hedging of bets if you will, a preparation for a world where geopolitical and economic multi-polarity is the new norm. And India's central bank under the radar is proving itself to be ahead of that curve just like China. To put this into perspective think of foreign exchange reserves as a lifeboat. You want it to be stable and you want it to be durable no matter which way the global economic winds blow. And for decades countries filled that lifeboat with U.S. debt, with U.S. treasuries. But now they're realizing that too much of one thing, even something as historically reliable and stable as treasuries, that could be a liability. India's pivot is a signal not just of where things are but of where things are going. And as the global economic landscape continues to shift, as it continues to transform, we will likely see more central banks following India's path as they rebalance, gradually step back from overexposure to the U.S. dollar and reach for assets that offer security when everything else feels quite shaky. Thank you for watching this video. I hope this quick recap was interesting. Please show your support. It does go a long way. Like, subscribe, and share. And follow me on Substack and Patreon. Support my work. It is very much appreciated. I will see you back here tomorrow. Take care.