BRICS Countries Planning New Gold-Backed Currency

<p>As tensions with Russia and China escalate, the so-called BRICS countries (Brazil, Russia, India, China, and South Africa) are preparing to strike a blow against U.S. dollar hegemony.</p>
<p>Last week, the Russian Embassy in Kenya declared, “The BRICS countries are planning to introduce a new trading currency, which will be backed by gold.&rdquo;</p>
<p>Although any claims coming from Russian sources invite skepticism, independent analysts expect BRICS to continue to pursue de-dollarization and for gold to play a role in that process.</p>
<p>A more specific framework for a gold-backed BRICS currency could be announced during the BRICS summit being held next month in South Africa.</p>
<p>Investors shouldn&rsquo;t expect China or other major powers to declare an immediate abandonment of the Federal Reserve note &ldquo;dollar&rdquo; in international trade. For now, there exists no single, universally preferred alternative.</p>
<p>Leslie Maasdorp, Vice President of the BIRCS New Development Bank said, &ldquo;It&rsquo;s going to take a very long time for currency movements to take shape so any discussion of alternate currencies is indeed a much more medium and longer-term aspiration.&rdquo;</p>
<p>That said, the trend of de-dollarization isn&rsquo;t some far-off future fantasy. It is happening now. Federal Reserve notes as proportion of foreign reserves have been steadily declining over the past few years.</p>
<p>Russia has had no choice but to pursue alternatives to the dollar in response to it being blacklisted from the SWIFT international payments regime.</p>
<p>Other nations have taken note of this retaliatory blacklisting &ndash; something the U.S. hadn&rsquo;t even done during the Cold War &ndash; and have been <a href=”https://www.reuters.com/business/finance/countries-repatriating-gold-wake-sanctions-against-russia-study-2023-07-10/&quot; target=”_blank” rel=”noopener”>increasingly repatriating their gold</a> holdings to insure against future attacks or sanctions.</p>
<p>Now China is looking to strike back at the U.S. as well.</p>
<p>President Joe Biden called China&rsquo;s Xi Jinping a &ldquo;dictator.&rdquo; Biden administration officials attempted to downplay the characterization. But offense was clearly taken by the Chinese Communist Party.</p>
<p>China moved to enact export controls on critical commodities, including rare earth metals. The United States is nearly 100% dependent on China to supply certain of these rare earths which are needed in high-tech and energy applications.</p>
<p>Treasury Secretary Janet Yellen went to Beijing to try to assuage the Chinese, insisting she wants the two powers to remain trading partners rather than adversaries.</p>
<p>Implicit in her appeal to China is that any move on the part of the Chinese to ditch the U.S. dollar and conduct trade in an alternative gold-backed currency would be viewed as an escalation of hostilities.</p>
<p>Of course, there is nothing the Biden administration can do to prevent China, its trading partners, or other countries around the world from continuing to accumulate gold as monetary reserves.</p>
<p>The mere fact that gold is being considered by BRICS countries as a basis for international trade should incentivize central banks &ndash; and individual investors &ndash; to accumulate precious metals. If gold&rsquo;s role as a global alternative currency is to increase, then so, likely, will its price.</p>

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