Either way should be able to achieve the objective of separating data from system/business logic.
In my 2 cents opinion, XML carries only data unless system logics is implemented in the form of data. Otherwise, XML files contain mainly data only. However, both have pros and cons.
DB solution requires a DB but requires simpler data retrieval logics. XML solution requires text file support but requires more complicated data retrieval logics.
Apart from the 2 solution, there are many other possible options such as csv files, fixed/variable length flat files, etc.
So, this is a question for the architect to decide.