On July 8, 2023, reports started coming in that RT, Russia’s state-run media outlet, had announced that a bloc of nations known as BRICS (Brazil, Russia, India, China, and South Africa) would be introducing a new trading currency backed by physical gold.
The concerns over this new currency, as well as a continued pattern of international de-dollarization, has many of our U.S. Money Reserve clients concerned. But whenever I run into an area of concern, I always like to look for opportunities to grow, either personally or financially. This situation is no different.
Whether a BRICS currency is really happening seems to be up for debate.
Despite reports from RT that this new BRICS gold-backed trading currency may be announced at the BRICS meeting this August in South Africa, other media outlets report less concrete findings. The Times of India, for example, wrote on July 8, 2023, that the BRICS alliance is merely planning to “float” the new currency and that in a press conference held on July 3, 2023, India’s external affairs minister, S. Jaishankar, stated that India “has no plans for a BRICS currency” and that “India might back out from creating the new currency,” focusing instead on strengthening India’s national currency, the rupee.
This would seem to correspond with more recent reports of India’s economic growth. On July 10, 2023, Goldman Sachs Research released a forecast showing India overtaking the United States as the second largest economy in the world by 2075 (the forecast showed another BRICS nation, China, overtaking the United States as the world’s largest economy sometime in the 2030s).
Other sources point to China’s recent gold acquisitions as not being intended to create a new gold-backed currency, but as an effort to enhance the credibility of its own currency, the yuan, which overtook the dollar as the most-used currency in China’s cross-border transactions this past April, according to Reuters.
It’s no secret that nations are moving away from the dollar, which could not only harm the currency’s dominance as the world’s reserve currency but also impact the effectiveness of U.S. government sanctions. However, whether the BRICS nations can agree to a new currency while still trying to support their own currencies is yet to be seen.
However, we can’t ignore the record amount of central bank demand for physical gold.
Whatever may happen at the August meeting among the BRICS nations, they all seem to have one thing in common: Their economies and/or governments may benefit from a reduction in the global power of the U.S. dollar. We also know that government banks have been stockpiling record amounts of gold, with the World Gold Council (WGC) reporting record demand in 2022 and Q1 2023 demand breaking the previous record, set in 2013, by an incredible 34%.
Regardless of why these nations are stockpiling gold, conventional economic wisdom tells us that with greater demand may come higher prices—which presents a unique opportunity for those of us who follow the precious metals markets.
If global gold demand continues to rise, prices may rise along with it.
This year, I’ve read and discussed multiple headlines regarding new potential gold-backed currencies. The common factor among them is a shared belief in the power of physical gold. Around the world, people still see the precious metal as the ultimate symbol of wealth.
Whether or not a BRICS gold-backed currency becomes a reality in the coming months or years, we’re continuing to see record gold demand from central banks around the world—just one factor that may be leading analysts like Nitesh Shah, head of commodities and macroeconomic research at WisdomTree, to expect gold prices to push to $2,285/oz. by Q1 2024. That would be a new all-time high for the precious metal. Another analyst, AG Thorson, wrote in an article for FX Empire on June 30, 2023, that he expects gold to rally toward $3,000/oz. over the next 12 to 18 months.
If “the gold train is about to leave the station,” as Thorson puts it, now may be the perfect time to consider adding more gold to your portfolio before prices rise.